Note: This article was provided courtesy of Iris.xyz.
By Eamon Porter
Every so often I meet a personal investor who will tell me that now is the right time or the wrong time to invest, depending on whether the markets are going up or down as well as depending on that individual’s past experience.
Despite having 30 years of investment experience I never get into an argument with them because I know something they don’t.
Namely, very, very experienced investment professionals rarely, if ever, out think the markets. Even the greats such as Warren Buffet and Anthony Bolton acknowledge that markets cannot be outguessed in the short term and their own success owes more to long term holdings rather than short term trading outlooks.
In any event, many people who are inexperienced in dealing with investment markets (and even some who are experienced) tend to look for signs that they are right in the perspective of what is happening at any point in time. They look for reassurance about what they are thinking, or more correctly hoping, can be confirmed by one or more public facts about the markets.
In Behavioral Finance terms this is referred to as Confirmation Bias. Put simply, people favor information that confirms their beliefs or hypotheses even if such confirmations turn out later to be false indicators.