I like to think of investing as less about numbers and spreadsheets, and more about managing the battlefield within my own mind. When I’m making decisions, especially under stress, my brain likes to cut corners and jump to conclusions. These are called cognitive biases, and they sabotage my results in ways both subtle and glaring. Over the years—and hours upon hours of reflecting on my own wins and losses—I’ve noticed that a handful of these mental quirks sneak into nearly every portfolio blunder I make. Let me walk you through five of the biggest culprits and show you exactly how I’m learning to fight back.
“Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” —Benjamin Graham
Why does my brain search for only the evidence that agrees with me when I research a stock? It’s that classic case of confirmation bias. I get excited about a hot company, so I Google “reasons this stock will double,” and—surprise!—the internet obliges. Meanwhile, I skip past the glaring red flag articles or write off skeptical analysts as “negative.” The result? I feel clever, but I’m only reinforcing my own narrative, not actually checking if I’m right. I’ve caught myself overweighting good news on a struggling investment, clinging to hope, and refusing to accept uncomfortable truths.
The way I counter this? I now keep an investment journal. For every trade, I force myself to write down not just why I like a stock, but arguments against it. Sometimes I’ll pretend I need to convince a skeptical friend to invest alongside me—this simple shift gets me looking for what I might be missing. I even go so far as to schedule time specifically to review the negative side. Does this sound tedious? Maybe, but it helps dismantle my one-sided optimism.
Ask yourself: Do you ever find yourself seeking out experts who only echo your own opinions? What’s the biggest blind spot that confirmation bias has ever caused in your portfolio?
“Ignorance more often begets confidence than does knowledge.” —Charles Darwin
Few things cause more regret in my investments than loss aversion. Psychologists say losing money feels up to twice as painful as making money feels good. That’s why, when a position dips below my entry point, I freeze. I tell myself, “I’ll just wait till it gets back to break-even, then sell.” But that day rarely arrives, and before I know it, the loss compounds. The odd part is, I know—rationally—the decision shouldn’t hinge on my original price. The market doesn’t care what I paid.
What helps me escape this trap? These days, I set clear stop-loss and profit-taking points before I even buy. If the numbers flash red and cross my threshold, I force myself to act. Just writing down these rules in advance, then treating them as a contract with myself, neutralizes a lot of the panic when emotions run high. It took me years to embrace this simple trick, but it has saved me from far deeper losses.
Have you ever held onto a loser, hoping it would just rebound to what you paid? How often has that strategy really worked out for you—honestly?
“Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble.” —Warren Buffett
Do you remember how every news outlet in 2021 was hyping certain cryptocurrencies for their explosive recent gains? Recency bias is powerful. When I see a big winner, I want to chase it. My brain tricks me into thinking the recent past will repeat, and I forget to ask if it’s a good value today. It works the other way too; after a market crash, the fear of continued losses makes me hesitate even when there are bargains.
I’ve learned to always zoom out and look at the big picture. Instead of obsessing over the last few months, I pull up a long-term chart. I deliberately review how assets performed across business cycles, not just the latest surge. When I consider reallocating, I force myself to compare my “hot pick” to broader historical trends—often, I realize the recent outperformance is an exception, not the rule.
What’s something you or someone you know bought solely because it did well recently? Did you check the ten-year history first—or just the last ten weeks?
“The investor’s chief problem—and even his worst enemy—is likely to be himself.” —Benjamin Graham
Anchoring is another sneaky saboteur. It’s the reason I sometimes refuse to sell a stock just because it’s below what I paid for it—not because the fundamentals have improved, but because I fixate on my original purchase price as “the” value that matters. Oddly enough, there’s nothing special about that price. It isn’t magical; it’s just a number from my personal history. Yet my mind clings to it as if letting go would admit defeat.
One way I battle anchoring is to perform a regular “blank slate” review. I look at each position and ask: if I had fresh cash today, would I still buy this at current prices for the same reasons? If the answer is no, I have to let go of the anchor and make a rational choice. Simply reframing the decision—pretending I’m starting from scratch—breaks the spell of that original number.
Is there a price point you’re still secretly tied to, even though it’s totally arbitrary? What would you recommend a friend do in your situation?
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” —Upton Sinclair
Finally, let’s talk about herd mentality. At extremes, nothing feels lonelier than going against the crowd. During every bubble, there’s a mighty chorus: “Everyone’s in—just look at the gains!” The fear of missing out is real, and I’ve caught myself buying into assets I don’t even fully understand, just because social sentiment—and my group chats—are all aboard. The crypto craze several years ago was a glaring example. We want to believe the wisdom of crowds, but markets routinely demonstrate that crowds are often irrational in the heat of manias.
What changed things for me was learning to ignore the media buzz and focus on my own thesis. I isolate my investment decisions from noise by setting aside time to review positions with zero reference to Twitter or the latest news. I imagine the market is closed for a decade—would I still want to own this? If I can’t answer yes, I’m probably getting swept up in a trend rather than making a wise choice.
When everyone you know is buying—how do you separate your independent judgment from groupthink? Have you ever regretted a trade just because “everyone else was doing it”?
“If you want to have a better performance than the crowd, you must do things differently from the crowd.” —Sir John Templeton
So how do I bring it all together? Awareness is the first line of defense, but it’s not enough. I’ve found real progress comes from practicing discipline, building habits, and keeping honest records. An investment journal has become one of my most powerful tools—I log every decision, along with my rationale, and review outcomes regularly. Tracking my thinking shines a light on repeating patterns I might otherwise miss.
Before each investment, I commit to predetermined exit points—both for losses and for profits. This takes some of the emotion out and prevents the “maybe just a little longer” spiral when things go sideways. For major decisions, especially when market volatility spikes, I lean on historical data, not the latest headlines. Reviewing how assets behaved in past crises reminds me that today’s panic (or euphoria) often looks trivial in hindsight.
Reassessing my holdings periodically as if I were starting over—no baggage, no emotional attachment—forces me to think clearly. And perhaps most importantly, I now practice intentional information fasting. I finish my own research before letting outside opinions cloud my thinking, especially during times of social frenzy.
As you reflect on your own investing journey, which of these five biases is your Achilles’ heel? What is one practical change you could make this week to keep your decisions rational and aligned with your goals?
The market will always tempt us with shortcuts and stories. But if I keep my mind sharp, slow down when it matters, and design systems that counteract my brain’s misfires, I stand a much better chance of thriving—regardless of which way the crowd or headlines are rushing. And that, I suspect, is where real edge lies—not in perfect forecasting, but in knowing myself.
