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Cognitive Biases Part I

07122018_Cognitive Biases

Cognitive Biases Part I

As we have discussed several times on this blog, human beings have evolved acute survival instincts over thousands of years of evolution, however our logical reasoning instincts remain quite primitive for the sophisticated world we navigate today.

This misalignment can cause numerous mental mistakes and false biases when it comes to interpreting data and making objective decisions. In fact, there are over 180 cognitive biases that warp how we process information, think critically, and perceive reality. Fortunately, we are self-aware of these biases and can self-correct for them, provided we can recognise when they may be occurring.

Obviously as investors it is critical for the team at Montgomery Global to be self-aware of these biases so we don’t fall into preventable traps. Hence today we have highlighted ten of the most relevant cognitive biases investors face and importantly can self-correct for when making investment decisions. We will follow up in a future post with a second set of key biases that are important to remain self-aware of as well.


School of Thought


Amit joined MGIM in April 2018 as a Senior Research Analyst after spending seven years as a credit analyst at Credit Agricole and Citigroup, based in New York. Prior to this, Amit was an investment banker with Citigroup for five years in New York and Sydney, focusing on Media and Telecoms; Metals and Mining; and Consumer Products.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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