Page 156 - A Canuck's Guide to Financial Literacy 2020

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• Hindsight Bias

Hindsight is always 20/20. Hindsight bias is the tendency of people to say that they
“always knew” that they were right after the fact happened. They may assume that
they possess special skills to predict the future. To avoid hindsight bias, first be
aware of it and if you can, keep a diary in regards to your investment decisions.

• Confirmation Bias
Beware of this bias when researching investments. This bias is the tendency of
investors to pay close attention to information which confirms their beliefs and ignore
information against it. We are all prone to confirmation bias – from the news we
watch to the websites we visit. We choose to embrace things that reflect our opinion
and news.

▪ Conservatism
This bias refers to investors who are too slow in responding to new information that
might contradict their beliefs. They’re too slow to act immediately.

▪ Representative Bias

Occurs when people confuse two objects or events of being similar in nature. It
involves stereotyping how close two objects might be related with one or another
when its fact, they’re completely different.
Bob is an opera fan who enjoys touring art museums when on
holiday. Growing up, he enjoyed playing chess with family members and
friends. Which situation is more likely?

A. Bob plays trumpet for a major symphony orchestra