Video
How to Overcome Confirmation Bias
I’m Hannah Whatley, an advisor with Rather and Kittrell.
A great example of how psychology impacts our financial lives is confirmation bias. Carl Richards, a behavioral finance expert, defines confirmation bias as gathering evidence to support what we’ve already decided on, while dismissing anything that disagrees with us, and calling that research.
We’re all guilty of this at one point or another. We see this when someone holds onto an investment or business, even after it’s proven itself to be a poor decision. It seems to be in human nature to wait too long to change our minds, even once the writing is on the wall.
To prevent this bias from impacting your financial life, be willing to fail fast and move forward. We can’t change past mistakes, but we can learn from new information and be willing to course correct. If you’d like to discuss this, visit us at rkcapital.com.
