Behavioural traps for advanced investors
Even experienced investors can fall into behavioural traps, like overconfidence, herd behaviour, or loss aversion. This article explains the common biases that affect advanced investors and provides strategies to manage them effectively.
What are behavioural traps?
Biases can lead to mistakes, like overestimating your skill, ignoring contrary evidence, or holding on to underperforming positions.
Watch out for:
- Overconfidence in predictions
- Seeking only information that supports your view
- Emotional attachment to winning positions
Why they matter
Experienced investors may take larger risks, mismanage diversification, or fall victim to market hype, thinking they are immune to bias.
Key reminders:
- Review portfolios objectively
- Stick to structured processes
- Be aware of herd behaviour during volatile periods
How to manage behavioural traps
- Set clear rules, including rebalancing guidelines
- Keep a record of investment rationales
- Review your portfolio regularly
- Reflect on biases periodically
Practical strategies:
- Use checklists before making decisions
- Focus on long-term goals, not short-term news
- Seek diverse perspectives to challenge assumptions
We don’t offer financial advice, seek independent advice if needed.
Capital at risk. All investing should be long term. The value of your investments can go up and down, and you may get back less than you invest.
Tax treatment depends on individual circumstances and may be subject to change in the future.