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Starting from this week I am going to introduce to my readers the different types of mental bias that will hider successful trading in us. Today’s topic is “Availability Bias”, a behavioural finance theory that is based on Kahneman and Tversky’s famous literature – Judgement Under Uncertainty: Heuristics and Biases in 1974. According to the availability bias theory, people pay attention to anything in the media that supports their fear and perception and ignore the other side of the story. In short, availability bias makes people less objective when making decisions. For instance, many people have misconception about investing in the stock market. When asked why they rather put their money in the bank than in the stock market, they said: “Why? Because I don’t want to lose all my savings”. People typically give too much weight to recent experience and extrapolate recent trends that are at odds with long-run averages and statistical odds. They tend to become more optimistic when the mark...

Let me start by introducing to you what is Behavioural Finance. It is the study of the influence of psychology on the behaviour of investors and their subsequent effect on markets. It combined the discipline of psychology and economics to explain why and how people make irrational or illogical decisions when they make investment decisions. For example, many investors know that before they invest in a particular stock, the first thing they should do is: RESEARCH! But honestly how many of us actually perform this step? You may be surprised that there are many investors who have the ability to do analysis on stocks but often find themselves making rush decisions based on tips and advice of their so-call expert friends. So in behavioural finance perspective, these investors are ‘irrational’. Irrational investors are easily swayed by emotions, they do little planning, lack of savings and have low risk tolerance. Interestingly, according to statistics, there is a relationship between risk t...

Yes, you can, but that doesn’t mean you should! A Will is an important legal document that contains your instructions and wishes for distributing your properties and assets after you die. This document contains the names of the people you want to benefit, your beneficiaries, as well as details about your home, land, vehicles, bank accounts, investments, jewelry, artwork, and other possessions. Your Will also allows you to choose a personal guardian to care for your children if you should die when they are still minors. Your Will should be written carefully, correctly and in compliance with the laws to be sure your beneficiaries will be taken care of when you are gone. In order for your Will to be valid, and accepted by the court, it must, with some exceptions, be in writing, signed with your signature, and witnessed by at least two witnesses who are neither relatives nor beneficiaries. Otherwise, the court may not accept your Will, and it may be unenforceable. If your Will is found inv...

I always tell people to invest rationally and prudently. Then you may ask: “But how?” To be honest with you, I was once ‘lost’ in the stock market before, I found myself investing aimlessly, invested in one counter then sold quickly when I heard some bad news or when I was not sure about the stock; or sometimes I found myself buying into a counter without any research at all like I was buying into a hurry, worried that if I delay the stock price would rally further! Then I realized I was not investing at all, I was simply speculating, ‘hoping’ the price will go higher after I bought which in fact it usually didn’t because I bought when everyone else were buying too which was already in an overbought position. So I finally looked into what all the experts have been saying: “Create an investment plan first”. I’ve heard so many times but I never followed this important step. I hope by sharing with you will help you to be a wiser investor. Below is a copy of a sample investment policy stat...