What this lesson is about
The bias that makes your own research feel more convincing than it actually is. Because you were never really looking for reasons you might be wrong.
Part 1 of 2
Confirmation bias is when you look for, prefer, and remember information that supports your beliefs, while ignoring evidence that goes against them. It’s sneaky because it doesn’t feel like bias. You think you’re just doing your research and finding validation. The issue is, your starting belief shapes your research. After you own a stock, you’re more likely to click on a positive headline than a negative one. You’ll find a bullish argument convincing and see the bearish one as flawed. You’ll recall the times a similar situation worked out, but forget the times it didn’t.
This becomes much harder to fight in today’s media landscape. Algorithm-driven feeds and online communities that share your views can create a true echo chamber. They show you more of what matches your beliefs instead of a balanced view. So, confirmation bias has more tools at its disposal now than in previous times of financial media.
Quick check
What is confirmation bias?
Confirmation bias is specifically about how people gather and weigh information, not about a specific investing rule or one particular group of investors.
Part 2 of 2
Quick check
How might confirmation bias show up practically after someone buys a stock?
Once a decision is made, confirmation bias tends to bias the ongoing information-gathering process toward validating that original decision rather than objectively re-evaluating it.
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