INFORMATION OVERLOADWhen faced with more information than the human brain has time to assimilate and process, humans adopt strategies to simplify decision making. While these strategies require less cognitive e�ort, they may be less accurate than a more rigorous decision process.

With all the information readily available today, investors may become overwhelmed, leading to panic or poor decision making.

For an investor this could mean believing their knowledge of an investment is greater than it actually is.

OVERCONFIDENCE/EGOOverconfidence suggests that we tend to overestimate the accuracy of our predictions.

Investors may not feel the need to diversify a portfolio due to the recent 10-year bull market run, forgetting the possibility of a market correction.

FAMILIARITY BIASA familiarity bias refers to our preference for outcomes and patterns we have observed previously.

Investors may want to pursue a particular category or investment due to it being popular amongst family and friends.

HERDINGThe concept of herding refers to an individual’s desire for acceptance within their particular peer group.

LOSS AVERSIONThe principle behind loss aversion is that humans are a�ected more emotionally by losses than gains.

For investors, loss aversion may mean wanting to pull out of an investment due to a minor loss, despite the long-term performance or role the investment plays in a portfolio.

ANCHORINGThe process of anchoring means an individual tethers their forecast to an original reference point, then fails to adjust su�ciently from that reference point when new information or evidence becomes available.

An investor may have had a great first experience when investing in a specific security or investment vehicle and remain biased despite the investment not aligning with their long-term portfolio goals.

For additional insights, call 866.361.1720 or visit 361capital.com.

Behavioral Finance BasicsImpediments Influencing Human Behavior