The traps in your own head

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Key idea: Anchoring, chasing recent winners and overconfidence cost investors more than bad arithmetic. Simple rules written in advance help.

The hardest part of investing is usually not the maths. It is the habits every human brain brings to it.

Anchoring: fixing on a past price. "It used to be $150, so $90 is cheap." The old price says nothing about today's value. Recency: assuming whatever happened lately will continue, so hot sectors look safest just before they cool. Overconfidence: after a few wins, believing your estimates are more precise than they are. Loss aversion: holding a falling share far too long because selling makes the loss feel real.

Defences that work: write down why you are interested in a company and what would change your mind before you own it. Check the reasons, not the price, when you review. And keep a record of your decisions, including the misses, the way Equity Rank publishes its own track record.

Tomorrow, the last day, we turn the whole course into a checklist.

Quick check

"This stock was $200 last year and is $120 now, so it must be cheap." Which trap is this?

See how Equity Rank tracks its own record →

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