How Collaborative Investing Prevents Behavioral Finance Pitfalls

Humans aren´t born investors and there are many aspects of our natural behavior which points us in the wrong direction under certain conditions. However, we are smart enough to understand our limitations and create structures around it to prevent pitfalls.

Human evolution

The relatively new field of behavioral finance offers one key lesson: You are your own worst enemy. Psychologist in the 1960s started exploring why so many people make poor financial decisions. Our slowly evolving brain is simply not equipped to manage the new invention of money and investing. However, investors can counter this problem by stepping outside their limited perspective. Let’s look at three cognitive biases that KINFO helps avoid.

Forget Conventional Wisdom

Many investors rely too heavily on misleading conventional wisdom. The problem is that broad generalizations about investing don’t apply to all. Moreover, as markets change this “wisdom” becomes outdated. However, people still cling to these ideas long after there dead. The term “confirmation bias” represents this problem. Too often investors seek out only the information that confirms their preconceived notion of a stock, sector, or the market as a whole. Meanwhile, significant contradictory information is ignored.

The social aspect of KINFO is important because it helps to prevent this bias. When you engage with other investors with different perspectives, you break free from these preconceived notions. On KINFO you can see the performance of other investing methods you would never have considered in the first place.

You’re A Person, Not A Sheep

We all like to see ourselves as individuals. Unfortunately, “Herd Behavior,” tells us we’re like everybody else. The stock market is an obvious example of this cognitive bias. An early example dates back to Europe in the 1600s. Tulip bulbs were a hot commodity.

The frantic pursuit of these flowers created a bubble. At the peak, a single bulb could cost as much as ten times the annual income of the average craftsman. Of course, prices eventually crashed. Since then we’ve seen the dot-com bubble, the real estate bubble, and even the famed Bitcoin had a bubble in 2013.

KINFO users don’t follow the herd. Our users are a group of aggressive but smart investors looking beyond stock market hysteria. They use analytics to detach from the mood of the street and create strategies founded on fundamentals. Irrational exuberance is not a financial plan, research is.

Go Long

Good news doesn’t always stay good. The “availability bias” illustrates that people, and therefore the market, overreact to recent information. A positive statement from the president or an encouraging remark from a central bank can immediately spark euphoria among investors. This emotional response occurs because the news in recent. Stocks climb based on the novelty of the information rather than the fundamentals. As a result, prices return to their pre-hype levels, and capricious investors are disappointed.

On KINFO we offer not only varied opinions from our users but valuable data-driven insights from industry insiders and hedge fund managers. This environment helps temper the wild swings in emotion that have become characteristic of the markets today.

KINFO helps you step outside your biases and explore a world of original investors. We offer the combination of hard data and user insights. Break free from the cognitive biases that prevent growth.

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