Surava Capital
Five biases worth knowing by name
Recognizing a bias in the moment is far easier once you know what it's called and what it feels like from the inside.
- Loss aversion Losses tend to feel considerably more painful than equivalent gains feel good. This can push people to sell winners too early to "lock in" gains, while holding onto losers far too long hoping to "get back to even."
- Recency bias Giving too much weight to what's happened recently, assuming a rising market will keep rising, or a falling one will keep falling, simply because that's the pattern of the last few months.
- Confirmation bias Seeking out information that supports a decision you've already made, while unconsciously discounting information that challenges it. Easy to fall into after buying something you feel good about.
- Herd behavior Feeling more comfortable making a decision because "everyone else is doing it," even when the underlying reasoning hasn't been examined. Often most powerful at exactly the moments it's least useful, market tops and panics.
- Overconfidence Overestimating your own ability to predict outcomes or pick winners, particularly after a string of good results that may have simply been luck.
Habits that reduce their impact
You can't switch these off through willpower alone, they're built into how human judgment works under uncertainty. What helps is structure: writing down the reasoning behind a decision before you make it, so you can check it later against what actually happened rather than rewriting the story afterward. Setting rules in advance, like a rebalancing schedule, removes the need to make an emotional decision in the moment. And deliberately seeking out the strongest argument against your own position, before you act, counteracts confirmation bias directly.
This article is for general educational and informational purposes only. It is not investment, tax, or legal advice, or an offer of any regulated financial service. Views expressed are those of Surava Capital.