How to make better investment decisions

When making investment decisions, our most damaging cognitive bias may be our tendency to ignore the past. Here’s how to avoid it.

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Daniel Kahneman: beware overoptimism
(Image credit: 2016 Getty Images)

Daniel Kahneman, author of Thinking, Fast And Slow (2011), is one of the best-known names in behavioural finance. Starting in the 1970s, he and Amos Tversky examined decision-making, giving names to a range of cognitive biases that stop us from behaving in the narrowly "rational" way assumed by many economic theories. One such bias is singled out by Michael Mauboussin, director of research at BlueMountain Capital, as one of the most important for investors to overcome. In a recent interview with Real Vision, Mauboussin talks about the importance of avoiding overreliance on the "inside" view.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.