Today we talked about the bandwagon bias. It is a tendency to want to conform, be part of the crowd, to do things because others are doing them or believe in them. It’s also known as herd mentality and is similar to groupthink. This is a bias we see daily in investing and in financial planning. It happens so often because it's natural. Nathaniel gave a couple of examples in investment history of how that bias has caused some investors' losses. Tim discussed how that impacts clients' financial planning: they want us to tell them how are they doing compared to our other clients. The answer is always: it doesn't matter because everyone has different goals and lifestyle preferences. You may fancy your neighbor's new BMW, but do you know if they took on heavy debt to buy it? Do you still want to follow in their footsteps? As to how to fight back against bandwagon bias, Dan suggested that we should take time to think and think critically. Tim added that you should not be afraid of asking questions, and to be the dumbest person in the room. Nathaniel reminded us to try to be rational and be honest with yourself as to what YOU want in your life. Tim's conclusion is simple but straight to the point: understand who you are and what you value.
