Are you a better-than-average driver? Chances are, you answered yes. That’s because nearly threequarters of people think they are better-than-average drivers.* Besides being mathematically impossible, this statistic is an example of overconfidence—and is just one illustration of how certain biases can influence our thought patterns.
These behavioral biases sometimes help us make smart decisions. But they also can cloud our judgment and lead us to make irrational decisions. That’s especially true when it comes to investing. At a time when markets are down and it’s impossible to predict what tomorrow will look like, our perceptual distortions can make a difficult situation worse.