"Enthusiasm is the yeast that makes your hopes shine to the stars. Enthusiasm is the sparkle in your eyes, the swing in your gait. The grip of your hand, the irresistible surge of will and energy to execute your ideas." Henry Ford

Stockmarket News Updates

Sign up for our FREE Stockmarket News email service.

Click here


The next cognitive illusion is known as availability bias. When confronted with a decision, humans’ thinking is influenced by what is personally relevant, salient, recent or dramatic. Put another way, humans estimate the probability of an outcome based on how easy that outcome is to imagine.

Consider the following example. In the months after the September 11 terrorist attacks, travellers made the decision that travelling to their destination by car was a far safer way than by air. In light of the very recent (at the time), salient and dramatic events of September 11, this decision seemed an obvious and wise one. The probability of danger when travelling by air seemed much greater than travelling by car… when you think about it, at that time, it was far easier to imagine something bad happening when travelling by air.

However, this was the availability heuristic at work. The truth of the matter was that firstly, air travel had never been safer than in the months following September 11, on account of the massively increased security. And secondly, on account of far more people hitting the roads come holiday time, there were inevitably many more fatal accidents. Upon examination of the statistics, it was far more dangerous to drive than to fly (US road fatalities in October-December 2001 were well above average) and yet, the availability bias humans suffer from made many feel that driving was the smarter choice… this decision-making error cost some people their lives.

We also apply this bias in the world of investing. For instance, availability bias can result in our paying more attention to stocks covered heavily by the media, while the availability of information on a stock influences our tendency to invest in a stock. The dot.com boom of 1999/2000 is a great example. The availability of information and media coverage of internet stocks was such that people were more inclined to invest in them than they would have otherwise been.

Be wary of following the latest market fad simply because of the availability of information. If you have read it in the newspaper, you may well be amongst the last in the market to know!!

Profile: Warren Buffett

Far and away the most famous and successful stock market investor of all time.


Why Invest in Shares?

Beyond shares being the best long-term investment and having tax benefits, they also offer other advantages, including flexibility and liquidity.


Patience in InvestingCharacteristics of an Attractive InvestmentGarbage Collection or Investing?Goals
How Does the Stock Market Work?Why Invest in Shares?Choosing a StockbrokerOpening a Broking AccountBroker's CostsHow Much Do I Need to Start Investing?
Buying SharesDividendsBuying for DividendsTax Implications of Shares
Developing an Investment StrategyTakeoversTakeover StrategiesTakeover Q&A
Basic Options TerminologyContracts for Difference (CFDs)Option UsesOptions
Benefits of DIY SuperannuationWho Can Participate in DIY Superannuation?Investment Requirements
FramingLoss AversionAnchoringHindsight BiasConfirmation BiasCognitive DissonanceRepresentativenessAvailability BiasHerdingSelf Attribution Bias
Benjamin GrahamGeorge SorosWarren Buffett