Markets
These Five Cognitive Biases Hurt Investors the Most
There is no shortage of cognitive biases out there that can trip up our brains.
By the last count, there are 188 types of these fallible mental shortcuts in existence, and they constantly impede our ability to make the best decisions about our careers, our relationships, and for building wealth over time.
Biases That Plague Investors
In today’s infographic from StocksToTrade, we dive deeper into five of these cognitive biases – specifically the ones that really seem to throw investors and traders for a loop.
Next time you are about to make a major investing decision, make sure you double-check this list!
The moves that may seem instinctual for the average investor may actually be pre-loaded with cognitive biases.
These problems can even plague the most prominent investors in the world – just look at JPMorgan’s Jamie Dimon!
Biases to Avoid
Here are descriptions and examples of the five cognitive biases that can impact investors the most:
Anchoring Bias
The first piece of information you see or hear often ends up being an “anchor” for others that follow.
As an example, if you heard that a new stock was trading at $5.00 – that is the piece of information you may reference whenever thinking about that stock in the future. To avoid this mental mistake: analyze historical data, but don’t hold historical conclusions.
Recency Bias
Recency bias is a tendency to overvalue the latest information available.
If you heard that a CEO is resigning from a company you own shares of, your impulse may be to overvalue this recent news and sell the stock. However, you should be careful, and instead focus on long-term trends and experience to come up with a more measured course of action.
Loss Aversion Bias
No one wants to lose money, but small losses happen all the time even for the best investors – especially on paper.
Loss aversion bias is a tendency to feel the effects of these losses more than wins of equal magnitude, and it can often result in a sub-optimal shift in investing strategy. Investors that are focused only on avoiding losses will miss out on big opportunities for gains.
Confirmation Bias
Taking in information only that confirms your beliefs can be disastrous. It’s tempting, because it is satisfying to see your previous conviction in a positive light – however, it also makes it possible to miss important findings that may help to change your conviction.
Bandwagon Bias
No one wants to get left out, but being the last one to pile onto an opportunity can also be cataclysmic. If you’re going to be a bandwagon jumper, make sure you’re doing it for the right reasons.
Markets
U.S. Debt Interest Payments Reach $1 Trillion
U.S. debt interest payments have surged past the $1 trillion dollar mark, amid high interest rates and an ever-expanding debt burden.
U.S. Debt Interest Payments Reach $1 Trillion
This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.
The cost of paying for America’s national debt crossed the $1 trillion dollar mark in 2023, driven by high interest rates and a record $34 trillion mountain of debt.
Over the last decade, U.S. debt interest payments have more than doubled amid vast government spending during the pandemic crisis. As debt payments continue to soar, the Congressional Budget Office (CBO) reported that debt servicing costs surpassed defense spending for the first time ever this year.
This graphic shows the sharp rise in U.S. debt payments, based on data from the Federal Reserve.
A $1 Trillion Interest Bill, and Growing
Below, we show how U.S. debt interest payments have risen at a faster pace than at another time in modern history:
Date | Interest Payments | U.S. National Debt |
---|---|---|
2023 | $1.0T | $34.0T |
2022 | $830B | $31.4T |
2021 | $612B | $29.6T |
2020 | $518B | $27.7T |
2019 | $564B | $23.2T |
2018 | $571B | $22.0T |
2017 | $493B | $20.5T |
2016 | $460B | $20.0T |
2015 | $435B | $18.9T |
2014 | $442B | $18.1T |
2013 | $425B | $17.2T |
2012 | $417B | $16.4T |
2011 | $433B | $15.2T |
2010 | $400B | $14.0T |
2009 | $354B | $12.3T |
2008 | $380B | $10.7T |
2007 | $414B | $9.2T |
2006 | $387B | $8.7T |
2005 | $355B | $8.2T |
2004 | $318B | $7.6T |
2003 | $294B | $7.0T |
2002 | $298B | $6.4T |
2001 | $318B | $5.9T |
2000 | $353B | $5.7T |
1999 | $353B | $5.8T |
1998 | $360B | $5.6T |
1997 | $368B | $5.5T |
1996 | $362B | $5.3T |
1995 | $357B | $5.0T |
1994 | $334B | $4.8T |
1993 | $311B | $4.5T |
1992 | $306B | $4.2T |
1991 | $308B | $3.8T |
1990 | $298B | $3.4T |
1989 | $275B | $3.0T |
1988 | $254B | $2.7T |
1987 | $240B | $2.4T |
1986 | $225B | $2.2T |
1985 | $219B | $1.9T |
1984 | $205B | $1.7T |
1983 | $176B | $1.4T |
1982 | $157B | $1.2T |
1981 | $142B | $1.0T |
1980 | $113B | $930.2B |
1979 | $96B | $845.1B |
1978 | $84B | $789.2B |
1977 | $69B | $718.9B |
1976 | $61B | $653.5B |
1975 | $55B | $576.6B |
1974 | $50B | $492.7B |
1973 | $45B | $469.1B |
1972 | $39B | $448.5B |
1971 | $36B | $424.1B |
1970 | $35B | $389.2B |
1969 | $30B | $368.2B |
1968 | $25B | $358.0B |
1967 | $23B | $344.7B |
1966 | $21B | $329.3B |
Interest payments represent seasonally adjusted annual rate at the end of Q4.
At current rates, the U.S. national debt is growing by a remarkable $1 trillion about every 100 days, equal to roughly $3.6 trillion per year.
As the national debt has ballooned, debt payments even exceeded Medicaid outlays in 2023—one of the government’s largest expenditures. On average, the U.S. spent more than $2 billion per day on interest costs last year. Going further, the U.S. government is projected to spend a historic $12.4 trillion on interest payments over the next decade, averaging about $37,100 per American.
Exacerbating matters is that the U.S. is running a steep deficit, which stood at $1.1 trillion for the first six months of fiscal 2024. This has accelerated due to the 43% increase in debt servicing costs along with a $31 billion dollar increase in defense spending from a year earlier. Additionally, a $30 billion increase in funding for the Federal Deposit Insurance Corporation in light of the regional banking crisis last year was a major contributor to the deficit increase.
Overall, the CBO forecasts that roughly 75% of the federal deficit’s increase will be due to interest costs by 2034.
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