Investing
DunningâKruger Effect
New investors often believe they understand the market after a few wins, leading to overconfidence and losses. Awareness of the effect promotes cautious investing.
Anchoring
Avoid anchoring your investment decisions on past performance or an arbitrary number, and consider the overall potential.
Optimism Bias
Knowing optimism bias can help you make more balanced investment decisions, considering potential risks and market fluctuations.
Pessimism Bias
Knowing pessimism bias can help you make more balanced investment decisions, considering potential growth and positive market trends.
Birthday Paradox
Topic: Deep probability Understanding - Use the principles of probability to evaluate risk and make smarter investment decisions.
Monty Hall Problem
Topic: Deep probability Understanding - Building a diversified investment portfolio to optimize returns and minimize risk.
Skinner's Superstition Experiment
Base decisions on research and analysis instead of superstitions or "gut feelings."
Similar Situations
Availability Bias
Cryptocurrency Investments: Avoid investing based on hype from viral stories of overnight millionaires.
Pareto Principle
Relationship building: Investing time and effort in the relationships that provide the most support and satisfaction.
Stanford Marshmallow Experiment
Retirement planning: Delay immediate gratification by saving and investing for a comfortable future retirement.
Law of Deminishing Returns
Saving money: Investing in quality products that offer long-term value without overspending for negligible improvements.
Loss Aversion
Retirement planning: Knowing loss aversion can help you make more balanced decisions about saving and investing for retirement, without being overly focused on potential losses.
Gambler's Fallacy
Investing in stocks: Recognizing the gambler's fallacy can help you make more rational decisions about buying or selling stocks, based on objective analysis rather than recent trends.
Ikea Effect
Assembling flat-pack furniture: Understanding the Ikea Effect can help you evaluate whether it's worth investing your time in assembling furniture or if it's better to buy pre-assembled pieces.