Video
Avoid Anchoring Bias
I’m Hannah Watley, an advisor with Rather and Kittrell.
Anchoring bias is when you latch onto a particular piece of information, whether it’s relevant to the decision you’re making or not. We see this in the tendency to chase more. Whether it’s a certain return, a higher net worth, or more stuff, it’s easy to anchor onto a target that doesn’t actually matter to us.
Think about the person who’s set on beating the S&P 500. How the S&P performs and the risk that it takes to get there has nothing to do with this person, or what matters to them. Yet, they’re stuck on a treadmill of beating this one particular index.
I once had a wise client tell me, “I’ve won the game, why would I play overtime?” You can avoid anchoring bias and the treadmill of more by defining your why. Why are you running? At what point have you won the game, so you can stop playing overtime?
If you’d like to discuss this, visit us at rkcapital.com.
