Understanding the difference between REVIEW and RELIVE
Anchoring bias paralyses decision making on account of some unpleasant past experience.
Let’s say somebody experienced a loss during a past market meltdown and walked out of equity investing never to step in again.
This is anchoring bias or we can say anchored to the past.
The way out of this bias is to REVIEW the bias rather than RELIVE the bias.
When you REVIEW you analyse dispassionately with you mind keeping the heart out of the process. There is no place for emotion in REVIEW.
When you REVIEW you figure out
1) Market correction is the nature of the beast. Correction is part and parcel of equity investing and one has to take it in one’s stride in order to benefit over the long term. What happened was what was meant to be.
2) Market correction ain’t permanent loss. It is a temporary notional loss and the loss would recover over time.
3) Market correction is not driven by investment but by environment (macro factors) which eventually markets recover
4) Having patience and conviction is more important than having knowledge
5) Market crashes are opportunities to invest and a time to reclaim lost opportunities of the past
Any person who REVIEWS an event will land up gaining from it.
However, instead of REVIEWING if you start RELIVING the past you allow your emotions to overpower your ability of cognitive thinking; the power to dissect and analyse a situation dispassionately.
You experience the same feelings that you had felt in the past and it seems it will recur all over again. The past experience becomes the present feeling and the mind freezes and logic becomes elusive. The memory of loss overwhelms everything else and the heart just takes over decision making. All emotion and no cognition.
Therefore learn to REVIEW, learn from it and move on in life.
And stop RELIVING.