Mental Models: Recalibrate Biases to Cope with Pandemic: #48
Biases investors need to be aware of include ILLUSIONS OF INVULNERABILITY and ILLUSIONS OF CONTROL. Due to years of investing success investors feel invulnerable and are making decisions from their mental model which needs recalibration, along with the bias Illusion of Control. For more on this topic explore FIVE STAR reviewed book “Understanding Behavioral Bia$” There will continue to be an evolution to biases that impact us as the pandemic unfolds. Consider the REFLECTIVE EFFECT - the actions and beliefs investors have and are self reinforcing, we need to recalibrate things we believe to be true based on life PRE-PANDEMIC. See George Soros book “Alchemy of Finance” for more on this topic. Investors need to make rational decisions and beware that they are emotional charged. It is necessary to rationally assess the market despite the environmental influences.