by winston » Sat Oct 19, 2019 9:18 am
Present Bias
Present bias is when an investor chooses the "sooner" options between two prospective choices.
When it comes to our money, this typically means we choose the "sooner" pleasure of spending what we have today, versus the "later" option of investing it, being patient, and letting it compound for tomorrow.
Americans would rather spend the money they have now than wait, even though saving it would mean having a comfy, stress-free retirement later ...
Of course, this goes far beyond just saving for retirement. In everyday investing, the investor may take their profits in a stock too soon when it grows a little volatile, even though the company's fundamentals are still perfectly healthy and growing.
Or they invest too early because the financial media is hyping the stock up. As a result, they overpay for the stock and are stuck with it when folks lose interest.
One of the best ways to avoid this bias is by adopting a plan. Do you know how much you need to set aside for savings and investment today? How much does that mean is left over for you to spend on everyday purchases right now?
Source: Investor Place
It's all about "how much you made when you were right" & "how little you lost when you were wrong"