Do not expect that things will always go according to plan. Be prepared for all outcomes including unpleasant ones: There is an old saying, “Hope for the best, but plan for the worst”.They rely more on their memory than rational, systematic and thorough analysis.
Relying on memory instead of logical analysis: People with hindsight bias rely on their judgement based on past experience.In investments you should be prepared for unexpected outcomes and plan accordingly. However, they may not be prepared for smaller events which also have an effect on investment Do not track your portfolio on a daily basis: Investors with hindsight bias tend to base their decisions on major events they have experienced.You need to understand what will make your financial goals successful and filter out the unimportant information. Not be ready for unexpected outcomes: Know what is important and what is not.Over-confidence: Over-confidence in our investment knowledge or abilities can lead us to make risky investments or investments without doing the necessary homework.It can lead to the following negative consequences:. People explain events post facto using the benefits of hindsight, but this bias leads people to believe that such events are more predictable than they really are. We are not saying that they are consciously lying or they are frauds they have the behavioural trait of hindsight bias. Beware of people you always claim that they knew what would To the domain of investments, you must realize that there is an element of unpredictability or randomness in price movements in general and price outcomes of different events. It was a matter of chance and you were lucky. But just because the results were what you wanted does not make you a cricket, political or investment expert. In all the three examples, the results were favourable for you. Your profit was simply due to luck, not due to your ability to The stock price rose and you made a handsome profit. According to random walk theory of stock prices, the price can either rise or fall in the short term. What if the party lost by a close margin? If you say that, you always knew that this party would win by a big margin then it isĪ case of hindsight. When the results are declared and the party you supported wins by a big margin. Elections have taken place and opinion polls suggest a close contest.You are misinterpreting chance or luck with The batsmen would have simply taken their chances and got lucky. People who have played cricket know that scoring 20 runs in one over against a top bowler is a very difficult task. If you always knew that your team will win the match then you may be exhibiting hindsightīias. Your team scores the required runs and wins the match. Your favourite team is playing in the IPL final, needing 20 runs to win in the final over.Distributor Initiated Transaction (DIT).