TRANSCRIPT:

Hi, Greg Vojtanek here of Fade In Financial. In a previous video I talked about having a type of bias as investors. I mentioned having a hindsight bias for me personally.

Today I want to talk about Confirmation Bias. This shows up in everyday life. We will look for something that confirms our preconceived position or opinion, and disregard anything that says the opposite. That’s a confirmation bias, especially in our political system.

You know we believe this one thing that this party is saying, and we’ll constantly read and conform our opinion on that. Then the other side says the opposite and we go “nah.” We just disregard it, like, “that’s just no, that’s nonsense.” That’s a confirmation bias.

So we have it in investing as well. If your friend tells you about this hot new company; this new sector; this new stock, that he or she really believes in, and maybe you go home and start doing some research. You see some articles that say this is a disaster. Don’t do this. And you go no, no, looking for another article. Looking for other research.

Then one pops up that says this is a great idea and here are some reasons why it’s a good idea. And you go Bingo! There it is! You just disregarded all of the negative things that were being said about this investment, and you focused on the one thing that confirmed your preconceived opinion.

That is a confirmation bias. It is very easy to fall into that, especially with investing. So I just want you to be aware of it when you’re doing your research for investments, that you might have a confirmation bias.

I hope you found this helpful. As always, do what is right for you because your situation is different, and thank you very much for watching.