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By Michael Yardney
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These 5 biases could be standing in your way of investment success [Infographic]

What is standing between you and property investing success? 

It could be YOU!

Maybe you’re too biased to be a successful property investor?

What do I mean by that?

Well…did you know that as property investors we can sometimes be our own worst enemy? mind set rich money lesson think motivational learn teach money

It’s not because of the decisions we make, the opportunities we consider, or the investments we miss out on, but rather, it’s due to the way we think.

It written about Cognitive Biases before. About how we think we're rational investors but we're not.

There is no shortage of cognitive biases out there that can trip up to our brains.

By the last count, I've read that there are 188 types of these fallible mental shortcuts in existence, and they constantly impede our ability to make the best decisions about our careers, our relationships, and for building wealth over time.

Recently Visual Capitalist provided the infographic of five of these cognitive biases which really seem to throw investors for a loop.

Next time you are about to make a major property investment decision, make sure you double-check this list!

These 5 biases could be standing in your way of investment success [Infographic]
Courtesy of: Visual Capitalist

5 BIASES TO AVOID

Here's some more details about these five cognitive biases:

Anchoring Bias 

The first piece of information you see or hear often ends up being an “anchor” for others that follow. 

Anchoring explains why you’ll pay $6 for an hour of parking after seeing $10 at a car park down the street.

The first number you see, especially when its a price that comes up in negotiation, colours any that come after it.

A high anchor influences you to spend more than you normally would

Recency Bias

Recency bias is a tendency to overvalue the latest information available.

If you heard that the property market has slowed down your impulse may be to overvalue this recent news and sit on the sidelines.

However, you should be careful, and instead focus on long-term trends and experience to come up with a more measured course of action.

Loss Aversion Bias 

No one wants to lose money, but small losses happen all the time even for the best investors – especially on paper.

Loss aversion bias is a tendency to feel the effects of these losses more than wins of equal magnitude, and it can often result in a sub-optimal shift in investing strategy.

Investors that are focused only on avoiding losses will miss out on big opportunities for gains.

Confirmation Bias Mindset

Taking in information only that confirms your beliefs can be disastrous.

It’s tempting, because it is satisfying to see your previous conviction in a positive light – however, it also makes it possible to miss important findings that may help to change your conviction.

Bandwagon Bias

No one wants to get left out, but being the last one to pile onto an opportunity can also be cataclysmic.

If you’re going to be a bandwagon jumper, make sure you’re doing it for the right reasons.

Read more about these interesting concepts here:

  1. 10 PSYCHOLOGICAL TRICKS OUR MIND PLAYS ON US AS INVESTORS
  2. ANOTHER 14 WAYS OUR MIND PLAYS TRICKS ON US AS INVESTORS

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
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