The next phenomenon is known as hindsight bias. What is hindsight bias exactly? Quite simply, it is the tendency for us humans to view things that have already happened as having been both relatively inevitable and predictable.
So how does this relate to the world of investing? Well, who among us haven’t at one time or another watched one of our stocks drop for some reason, and then gone on to lament that we can’t believe we didn’t see that one coming… it was SO OBVIOUS!!! But you see, the problem is that is wasn’t so obvious. It may be now with the benefit of hindsight but then again, we all know hindsight is 20/20.
And the problem with mistakenly believing that the occurrence was both inevitable and predictable is that we aren’t then able to adequately learn from the experience. It is important to learn from your errors, rather than simply attributing your mistake to your inability to notice something at the time that was so very noticeable. The truth is it never was obvious and your mistake was likely more than simply an oversight.