Top 5 Behavioral Bias Risks:

  • Familiarity bias – investing only with, and in areas you are familiar with such geography (Canada), or companies you recognize such as telecom stocks or bank stocks; or with familiar institutions such as big-5 banks;
  • Recency bias – over-emphasizing recent events to explain the near future, rather than placing information into historical context; Ex. Market crashed last year therefore another crash is imminent;
  • Endowment bias – investors psychologically value current investments over investments they don’t own;
  • Inertia or Status Quo bias – faced with new information or a wide variety of options, investors choose to keep things the same, and thus creating ‘opportunity cost’ from missing out on better investment strategies;
  • Regret Aversion Bias – avoiding changes for fear of making a wrong decision;
Top 5 Behavioral Bias Risks
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