InsiderFlow › Guides › Investor Psychology: the Biases That Cost Money
Your worst enemy in the market isn't the market: it's you. Behavioral finance — awarded two Nobel prizes — has documented the brain's systematic errors around money.
A loss hurts roughly twice as much as an equivalent gain pleases. Result: winners get sold too early and losers held too long ("it'll come back").
Buying because everyone buys, selling because everyone sells. It's the mechanism that inflates bubbles and amplifies crashes: the safety of the crowd is an illusion precisely when the crowd is most wrong.
Most investors rate themselves above average — statistically impossible. Overconfidence produces overtrading, under-diversification and leverage: the three documented killers of retail returns.
Whatever just happened feels destined to continue: after three years of gains risk seems gone, after a crash it seems eternal. Recent past returns are the worst advisor.
Rules written in advance (how much to invest, when to rebalance), automation (a monthly plan decides instead of emotion), and data instead of feelings: watching what great investors actually do — in public filings — rather than what the feed screams. That's the antidote InsiderFlow is built on.