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11 Biases that distort your Decision-Making:  Thumbnail

11 Biases that distort your Decision-Making:

Protection Wealth Lifestyle Retirement

1. Confirmation Bias - We interpret new information as confirmation of our existing beliefs. 

2. Availability Bias - We tend to rely on information that comes to our mind easily/the quickest.  

3. Action Bias - We favor action over inaction. That's why we sell or buy prematurely.  

4. Zero-Risk Bias - If a risk is considered small, we assume there is no risk at all.

5. Overconfidence - We overestimate our own knowledge and ability.  A.K.A. Dunning-Kruger Effect.  Often because we know too little to know better.  (Less knowledge => more confidence)  

6. Survivorship Bias - This is a sample bias that occurs when we assess only successful outcomes and disregard failures.

7. Gambler’s Fallacy - We tend to think that past events affect future possibilities.

8. Cause-Effect Fallacy - We always look for cause-effect relationships.  Thus, we find patterns even in totally random data.

9. Hyperbolic Discounting - We are wired to prefer instant gratification (e.g. payouts).  Even when offered significantly more in the future.

10. False Consensus Effect - Too often, we overestimate the degree to which others agree with us.

11. Psychological Denial - When something terrible happens, we tend to fall into a state of denial.