How Cognitive and Emotional Biases Affect Investing?
Due to a host of factors, the human mind does not always think rationally. Although there is a lot of room for emotions in many human affairs, there are certain areas where rational thinking is crucially needed. For example, you can’t afford to be emotional while investing.
Our evolutionary biology is at work when we behave emotionally where the situation demands us to act rationally. The advent of markets, especially the stock market, is a very recent development when viewed in the backdrop of human evolution. In fact, if the entire human history is plotted on a scale of 24 hours, the stock markets came into being only a few seconds before midnight!