Most People Are Bad At Investing

Why? Simply because they're human. People fall victim to behavioral biases that trick their minds, and in turn can wreck their investment portfolios. Don't believe me? The graph below shows the average behavior gaps among investors in three different academic studies (Sinha, Dichev, and Dalbar).

A behavior gap is the gap between an investor's returns and the returns of the funds in which they're invested. Investors chronically underperform what they invest in because they overestimate their intelligence - they try to time the market, change allocations when they shouldn't, etc.



The tendency of people to "anchor" to a piece of irrelevant information when making a decision


The two inner circles are the same size, but the way in which they're framed distorts their perceived size

Confirmation Bias

People who only seek out information that confirms their existing viewpoint