Investing term

What is Confirmation bias?

Reading the things that agree with you and ignoring the things that don't.

Confirmation bias is the tendency to seek out and believe information that supports what you already think, while dismissing what contradicts it. In investing it's corrosive: you read the bullish takes on a stock you own and wave away the warnings. The antidote is deliberately hunting for the strongest argument against your position.

For example

You own a stock, so you read only the upbeat analyst notes and skip the one warning about its debt — confirmation bias quietly editing your view.

Confirmation bias is taught hands-on in Stage 12 — Investor Psychology: FOMO, Panic & Biases.

See the lesson →

Related terms

AnchoringLetting one earlier number — like the price you paid — drive your judgment about a current decision.Base rateThe long-run average probability of an event, before you weight any recent evidence.Disposition effectSelling winners too early to lock in gains and holding losers too long to avoid realizing the loss.HerdingDoing what everyone else is doing because everyone else is doing it.
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