Personal Finance Essentials
Availability Bias
The Psychology of Investing > Availability Bias
We make decisions based on the information we have – but you might be failing to realize that there’s information you haven’t considered, because it wasn’t available to you.
The information that reaches us most easily is not necessarily the most accurate or the most relevant. Daily news coverage of market declines is vivid and memorable. The long-term record of market recoveries is dry and statistical. Because the negative news feels more real, we overweight it. Our decisions end up being shaped by the stories that are easiest to recall, not by the full picture.
Before making an investment decision based on something you recently heard or read, ask yourself: Is this the only information I should be considering? What important information might I be missing?