confirmation bias
Confirmation bias is the habit of noticing evidence that agrees with you and quietly ignoring everything that does not.
In plain English
You have decided to buy the shares. Now, without any conscious dishonesty, your mind begins filtering.
The article praising the company feels insightful. The one raising concerns feels ill informed. The friend who agrees with you is sensible. The one who disagrees does not understand this sector. You are not lying. You are simply doing what every human brain does, which is defend a decision it has already made.
This is confirmation bias, and in investing it is expensive.
It is why people hold failing positions long after the evidence turned, having read only the sources that agreed with them. It is why Ponzi schemes survive so long, because every payment received is treated as proof and every warning as jealousy. It is why people who believe property always rises never notice the ones who lost money on it.
The only defence is deliberate and uncomfortable. Before any large decision, go looking specifically for the strongest argument against it, and take it seriously. Find the person who thinks you are wrong and ask them why, properly, without preparing your reply while they speak.
If your position cannot survive its best opponent, it was never a position. It was a hope.
You are convinced a scheme is genuine. You read the testimonials and dismiss the regulator's warning as government interference. Six months later the scheme collapses. Every piece of evidence you needed was available to you and you filtered it out.
Questions people ask
How do I know if I am doing this?
Notice whether you have recently read anything that genuinely challenged your view and taken it seriously. If not, you almost certainly are.
Does it affect experienced investors?
Very much. Experience often makes it worse, because confidence makes the filtering feel like judgement.
How do I protect myself?
Actively seek the opposing case, write down in advance what would prove you wrong, and check honestly whether it has happened.
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