20 tips to Become a good Investor:
There might be thousands of different educations or materials out there to teach you how to become a good negotiator. I have learned, if you want to get good at something you need to know yourself and invest on yourself before anything else!
Here are few things that may be holding you back in your life or financials without being aware of them or knowing them. (you don’t know that you don’t know them)!
Knowing them will help you overcome these holdbacks and will improve your negotiation skills.
Here is list of 20 of them:
- Bandwagon bias: the tendency to do or believe things because many other people do!
If you blindly follow crowd, you will get where other people have got (if not worse)
This happens a lot in stock market or real estate, people rush to buy or sell only because they see other people do it.
we often find it emotionally or psychologically painful to go against the crowd. Some people are largely influence by crowd rather than by their own independent analysis. You can find this example a lot in financial and stock market; people start selling because everybody is selling or opposite!
- Herd mentally bias: the tendency to follow and copy what other people do
- Blind spot bias: the tendency to see yourself as less biased than others
Everyone may have seen people complain about other people not being flexible but rarely seeing own inflexibility
- Anchoring Bias: the tendency to rely too heavily on first piece of information people hear when making decision
Sometimes in deal negotiations, whoever makes the first offer establishes range of reasonable possibilities in others people’s mind. So sometimes making opening offer may leverage your position.
- Confirmation bias: the tendency to seek, interpret, and remember information in a way that
confirms what you already believe
in this case people usually don’t listen or remember or believe information that disqualify their belief and only hear and remember and believe what is aligned with their belief
By tuning how and who you get your information form, you will be able achieve different results in your life and financial.
- Availability bias: the tendency to make decision based on information that is easier to remember or find.
- Information bias: the tendency to seek information when it does not affect action.
More information is not always better!
- Streak bias and small number bias: the tendency to see false patterns and order and causality that isn’t there
Some people create pattern in random events and try to make it mean something.
Just imagine a person buys a house because of having a red door handle and his/her logic is; the last two homes that he/she had bought had red door handle and they turned out good investments so he/she decides to buy another one only because of this pattern.
Or some gamblers believe some numbers or colours have more chance to win.
- Curse of knowledge/experiment bias: well-informed people sometimes having hard time to understand common people. It is difficult for them to understand how other people don’t know something that is obvious.
- Frequency Illusion Bias: the tendency to see new information, names, ideas or patterns 'everywhere' soon after they're first brought to our attention.
- Hyperbolic discounting: the tendency for people to want an immediate payoff rather than a larger gain later on.
- Negativity bias: the tendency to magnify threat and have greater recall of unpleasant memories than positive ones
Some people would miss opportunities because they always think bad is stronger that good!
- Positivity bias: the tendency to be overly optimistic
Sometimes being over optimist put people in danger or some investments at risk
- Choice-supportive bias: the tendency to have positive attitudes about the things or ideas you choose, even when they are flawed
Sometimes people think what they have bought or invested is awesome even they see it loses value everyday!
- Planning fallacy: the tendency to underestimate how much time it will take to complete a task
I think all of us are familiar with this one!
- Post-Purchase Rationalization bias: the tendency to justify yourself after buying an expensive object.
You may have experience after buying something expensive you have tried to convince yourself that the purchase was worth it!
- Procrastinations bias: the tendency to act in favor of present moment rather than investing in future.
It sounds familiar?! I’ll do it later… (sometimes later means never)
- Scarcity bias: the tendency to see those things in limited supply as being more valuable
One time I heard from a person that we should rush and buy something before all homes are sold!! (home scarcity)
- Payment bias: the tendency to demand much more to give up an object than one would be willing to pay to acquire it
- Loss aversion bias: the tendency to react more strongly to losses than to gains