We live in our dreams and we start to manufacture illusions
We live in the world of various biases and illusions surrounding us.
In our day to day life, we are surrounded with biases which drive our outcome and we even don’t know that we are already fallen into the trap of these biases.
One of the bias is that, what we see we started perceiving things in that way.
Suppose we look a beautiful girl and a not so good looking girl in a competition related to singing then our first judgment will be that the girl with good looks is a better singer. Although there is an equal chance that the not so good looking girl is a good singer.
We just fell in the trap Halo effect
Similarly, We fall into a trap known as Narrative fallacy
We simply look at the story in the past and continue to make our perceptions about the futures, ignore the luck or the randomness which has taken part to shape that outcome.
Say a particular stock falls, then we can think that it’s fallen a lot, so now it will rise. That is a completely faulty perception
People Love stories and stories lead to fall in Narrative fallacies.
Hindsight Bias: - Once the event has happened then we began to say that we already knew that it will happen.
Now Bitcoin has again risen people would say yes we knew that this is on the cards. Although when it was going down they never gave away this prediction.
Like most of the stock analyst and sports, commentator does the same thing.
LUCK GUT and RaNdomnEss
1)These biases should be kept in mind while we invest.
2)We should back over investment with a bit of research and try to minimize these biases to get better results.
3)We should never ever underestimate the role of Luck Gut and Randomness as it will play its part.
4)Never try to measure past success or failure as the criteria for the future
5)Keep in mind the Black Swarn Events can occur and diversify accordingly.