Don't Let Hindsight Bias Derail Your Retirement

With the recent resurgence of short squeeze favorites GameStop (NYSE: GME) and AMC Entertainment Holdings (NYSE: AMC) as well as crypto underdog Dogecoin (CRYPTO: DOGE), there is a prevailing feeling that when asset prices rise in a meteoric fashion, it was all knowable in advance. However, research finds that our cognitive biases often serve to cloud our investment decision making.

It's very easy to look at a stock chart and say that we should have bought at the lows and sold at the highs, but before the events have happened, it's far more difficult to accurately forecast price movement. Here we'll discuss the impact of hindsight bias on your investment decisions.

Hindsight bias, in the financial world, is the tendency for human beings to feel as if they "knew it all along" when it comes to the performance of a particular stock or other investment. Headlines have raved about 1,000%+ returns in several stocks that are fundamentally unsound. But the feeling among novice investors is that these returns were entirely predictable -- and, perhaps more damagingly, that these returns will continue indefinitely into the future.

Source Fool.com