Investing is as much about overcoming human biases as it is about analysing companies. In this article you will discover five common biases—overconfidence, loss aversion, herding, home bias, and recency bias—that is quietly undermining your investment returns.
You'll learn practical, proven strategies to overcome these mental traps, such as trusting data over instincts, diversifying globally, and adhering to clear buy-and-sell rules. By applying these insights, you’ll make more systematic decisions, stay disciplined, and position yourself for better returns.
Estimated Reading Time: 7 minutes
5 Human Biases That Are Hurting Your Returns
As an investor, you’re not just battling market fluctuations—you are also up against biases that sneak into your decision-making process and harm your portfolio’s performance.
But here’s the good news, you can overcome them if you design your investment process to avoid them.
That is where the Quant Value newsletter’s investment process helps you, we have designed it to help you stay disciplined and make smarter, more systematic decisions. You will see how the newsletter’s tools and strategies help you recognize and overcome five common biases.
1. Overconfidence Bias: Trust Data, Not Guesswork
Overconfidence can lead you to overestimate your ability to pick winning stocks, often resulting in excessive trading and poor risk management. It is a common trap, especially if you’ve had a few big recent wins.
The Quant Value newsletter helps you avoid this by providing up to six thoroughly researched stock ideas each month. These ideas come from the best-performing strategies we’ve tested, removing the need for guesswork.
Instead of relying on gut feelings, you can trust the proven track record of beating the market. Plus, the clear easy to follow buy-and-sell instructions in each issue keep you focused on a data-driven approach, reducing the temptation to make impulsive trades or let losing ideas go unsold.
2. Loss Aversion Bias: Know When to Let Go
No one likes to lose, but holding onto a losing stock in the hope it will bounce back can seriously hurt your portfolio. Loss aversion, the inability to sell losing stocks keep investors stuck with poor performers, dragging down overall returns.
This is where the newsletter’s strict 20% trailing stop-loss rule is invaluable. If a stock drops more than 20% from its peak, it’s sold—no questions asked. This discipline prevents your losses from getting out of control and frees up your capital for better opportunities.
By following the newsletter’s recommendations, you have a clear system for managing losses while focusing on high-potential stocks.
3. Herding Bias: Avoid the Crowded Trades
It’s easy to get swept up in market trends, following what everyone else is doing. However, chasing popular stocks often means buying at inflated prices and setting yourself up for disappointing returns.
The Quant Value newsletter helps you resist herding by focusing on undervalued companies wherever we find them for you. The newsletter’s strategy finds investments in regions and sectors that mainstream investors ignore. I am sure you have never heard of most of the ideas in the newsletter.
Whether it’s small caps in Japan or value stocks in Europe, the newsletter gives you ideas tailored to provide strong returns, not follow the crowd.
4. Home Bias: Think Beyond Your Borders
Investing mainly in your home country might feel safe, but it limits your portfolio’s potential. Every country has its risks, and by sticking close to home, you miss out on better investments abroad.
There are simply more companies to look at.
The newsletter’s global approach ensures you have access to the best ideas from North America, Europe, and Asia. For instance, we regularly recommend undervalued companies from Scandinavia, Hong Kong, and Japan, markets most investors never look at.
By diversifying across markets, you reduce risk and increase your chances of capturing growth from different economic cycles. With the Quant Value newsletter, managing your own global portfolio is easy and effective.
5. Recency Bias: Stay Focused on the Long Term
Recency bias can lead you to overreact to recent market movements, causing you to abandon your investment strategy when it underperforms. It’s also tempting to panic during a downturn or chase after the latest stock that’s skyrocketed, but you know this rarely pays off.
The newsletter helps you stay grounded with a disciplined, long-term approach. Each recommendation is based on strategies tested over decades, not short-term trends. The model portfolio gives you clear buy and sell instructions on building and maintaining a balanced portfolio that aligns with your goals.
By following the newsletter, you avoid the emotional swings of the market and stick to a proven easy to implement plan.
Use the Newsletter to Act Today
As you have seen the Quant Value newsletter isn’t just a source of investment ideas—it’s your guide to overcoming emotional traps and biases that can hurt your returns.
Each issue is designed to make investing simple, disciplined, and effective. From strict stop-loss rules to market-beating strategies, you’ll have everything you need to stay on track.
Do you recognize any of these biases?
If so, now is the time to act. Start by signing up for the Quant Value's proven investment strategy. Take advantage of its global ideas, follow the stop-loss rules, and focus on the long-term.
Remember, the goal isn’t perfection—it’s consistency.
If you have already taken an important step by subscribing to the Quant Value newsletter. Keep using it to make better decisions and build a portfolio you can be proud of.
Together, we’ll navigate the challenges of investing and achieve success over the long term.
Frequently Asked Questions and Answers About The 5 Human Biases
1. How do I know if overconfidence is affecting my investments?
Answer: Overconfidence can sneak up on you, especially after a few big wins. If you find yourself making trades without checking data or feeling invincible about picking winners, this bias may be in play.
The solution?
Use tools like the Quant Value newsletter. Its data-backed recommendations remove the guesswork, helping you stay grounded and focused on strategies with proven success.
2. Why is it so hard to sell losing stocks, and how can I improve?
Answer: This is the loss aversion bias at work—it’s natural to hope a bad stock will bounce back, but holding on can hurt you more.
Setting a strict rule, like a 20% trailing stop-loss, makes it easier. This discipline prevents runaway losses and frees up cash for better opportunities. Follow a plan and stick to it.
3. How can I avoid chasing trendy stocks everyone else is buying?
Answer: Herding bias leads many investors to overpay for popular stocks, only to face disappointing returns later. The Quant Value newsletter focuses on undervalued, overlooked companies instead.
This approach keeps you from being part of the crowd, helping you find opportunities others miss.
4. I only invest in companies from my home country—is that bad?
Answer: Home bias feels safe but limits your returns. It’s like fishing in a small pond when there’s a whole ocean out there. A global strategy spreads risk and opens doors to undervalued companies worldwide. Tools like the Quant Value newsletter make managing an international portfolio simple, even for beginners.
5. How do I stop reacting emotionally to market swings?
Answer: Recency bias makes it tempting to panic when markets dip or chase gains when stocks rise sharply. The key is focusing on long-term, tested strategies instead of short-term noise. Stick to a plan like the one provided in the Quant Value newsletter, with clear and easy to follow buy-and-sell instructions that keep emotions out of your decisions.
6. What’s the biggest risk of not diversifying across regions?
Answer: Investing too heavily in one region exposes you to local economic risks. A global approach balances your portfolio and gives you access to growth across different countries and business cycles.
With recommendations spanning North America, Europe, and Asia, the Quant Value newsletter makes diversification easier and more effective.
7. How do I start building a disciplined investment process?
Answer: Start small by following a system like the Quant Value newsletter’s monthly recommendations. Use its stop-loss rules to manage risk, and focus on undervalued, high-potential stocks. Over time, you’ll see how consistency, not perfection, leads to better returns.
