"The financial markets are generally unpredictable. The idea that you can actually predict what’s going to happen contradicts my way of looking at the market." George Soros

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SELF ATTRIBUTION BIAS

Another phenomenon is known as self-attribution bias, which is the tendency of humans to attribute successful outcomes to our skill and to attribute unsuccessful outcomes simply to bad luck. There isn’t a great deal to say on this topic, as its relevance to investing is largely self-explanatory.

Investors who experience a run of successful results start to develop an inflated opinion of their own skill, thus possibly resulting in both complacency and exaggerated risk taking. And of course, if one endures a horrendous run in the market, by attributing this simply to misfortune, how is one to successfully learn from one’s mistakes?

Take care not to fall into this trap. Try and learn from your unsuccessful outcomes and when success comes your way, do not let overconfidence step in and prevent you from acquiring a realistic assessment of your own talents.