The Flaw of Overconfidence
Among the emotional components of market behavior, overconfidence may be the most destructive. It blinds the logical mind. It creates the illusion of certainty when conditions are uncertain. It convinces the investor that individual success, knowledge, and ability lead to success. Overconfidence is most dangerous among those with knowledge in a subject area. If a little knowledge is a dangerous thing, a lot of knowledge and experience can be both dangerous and blinding.
Having some knowledge is invariably a flawed condition, because it means an investor is not equipped to analyze the entire realm of risk involved in investing. However, once an investor has built a level of skill, increased success can easily lead to ...
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