Do you recognise this in yourself? If so then you have slain one of the biggest barriers to sensible investing. Not only that but not realising these traits exist will lead you to some awful judgements or inaction – we have seen it time and time again sadly. You are more open to superstition and not fact and more prone to scams and pure gambling when the odds are against you – they always are. We are here to help you realise these psychological traits are not good for prudent investing! Here’s the next in the series!
So here it is. Primarily it is when a gambler has a string of losses and they try to convince themselves that they are due a good win to compensate. Of course, unless mathematics is involved (eg a pack of cards with a definite number of outcomes), the ‘past’ has no relevance to the future for unrelated investments. This problem can become compounded if the gambler really convinces themselves it is evidently the case they are going to win (and win-back all their past losses) so they increase the stakes as a consequence – oh dear. (Do we hear that over half those buying National Lottery tickets actually truly believe they are going to win the big prize as that is how they will be removed from their present situation, whatever that may be.
The flip side to this is that if a gambler has a series of wins, then they consider they are an expert at predicting the future so their confidence grows and also the risks and stake money they commit, despite their success being purely down to sheer luck. And before you say ‘that’s not you’ it can manifest itself with things like residential property development and nice ‘safe’ assets like that too, let alone ‘Premium Bonds’, so beware!
