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Weekend reading: A map of all our mental biases

Weekend reading logo

What caught my eye this week.

I enjoyed the following comprehensive map of all the biases we face when using our brains. (Click through for a high-resolution version, the link is at the top of the page you’re taken to).

Every Single Cognitive Bias in One Infographic

It’s pretty clear that to err is human. And pretty amusing to remember all the economics text books – and the odd Nobel prize – premised on the notion that we make perfectly rational choices.

Have a great weekend!

From Monevator

The latest Slow and Steady Passive Portfolio update – Monevator

From the archive-ator: The bohemian investor – Monevator

News

Note: Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber.1

Markets and assets across the world are at record highs – Bloomberg

The millennials making a living from live-streaming – Guardian

Energy price cap will not take effect this winter, says industry – Guardian

London property market ‘won’t bounce back until 2021’ – Telegraph

Affordable homes in south-east England should cost £250,000 or less, says study – Guardian

FCA urged to launch full probe into pension transfer advice [Search result]FT

UK car sales slide for a sixth month amid falling consumer confidence – Guardian

The new £10 that sold for £7,200 – ThisIsMoney

Chart that reveals what an average Briton puts in and takes out of the welfare state at different ages.

The three ages of tax and welfare [Search result]FT

Products and services

Battle of the Banks! First Direct and Halifax offer £125 to switchers – ThisIsMoney

New HSBC app will show all your accounts in one place – Guardian

The cashback credit cards that are still worth having – ThisIsMoney

A quick history of the FTSE 250 – ThisIsMoney

Comment and opinion

Would you accept a five-year lock-up on your index funds for an extra 1%? – Morgan Housel

Financial news media doesn’t rhyme but it does repeat – A Wealth of Common Sense

European active funds lag the market, just like US ones – Morningstar

Why are European stocks chronically cheaper than US ones? – The Reformed Broker

Art buyers find few investment masterpieces [Search result, detailed]FT

The companies behind AIM’s incredible rally – Interactive Investor

What it’s like to buy a house without a mortgage – Simple Living in Somerset

Merryn: Active fund managers start to fight back [Search result]FT

How various return factors have done in 2017 so far – Factor Research

The September to remember – Investing Caffeine

The Brexit fallacy – Evening Standard

Don’t rely on the Bank of Mum and Dad [Search result, lots of ideas]FT

Fighting evil with index funds [Podcast, skip first segment unless Canadian]Canadian Couch Potato

Off our beat

Don’t eat like Warren Buffett… [An experiment]Business Insider

…but eating like Elon Musk is okay [From 2016]Business Insider

And finally…

“The unconventional, but inescapable, conclusion to be drawn from the past fifty years is that it has been far safer to invest in a diversified collection of American businesses than to invest in securities – Treasuries, for example – whose values have been tied to American currency.”
– Warren Buffett, Letters to Shareholders 1965-2016

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  1. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []

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{ 14 comments… add one }
  • 1 UK Value Investor October 7, 2017, 1:03 pm

    That bias diagram is too complex for me. I prefer this simpler list of biases:

    https://www.yourbias.is/

    They also do a list of logical fallacies, which is excellent for poking holes in arguments:

    https://yourlogicalfallacyis.com/

  • 2 dearieme October 7, 2017, 1:13 pm

    I choose rationally between the biases on offer.

  • 3 Gaz October 7, 2017, 1:31 pm

    Reading that Bloomberg piece ‘Markets and assets across the world are at record highs’ makes me wonder if we should heed Buffets manta of being cautious when others are greedy? I’m a relatively new investor (just a couple of years) so I’m wary not to get carried away in this bull market.

  • 4 Wephway October 7, 2017, 1:44 pm

    Lots of interesting articles as usual, thanks!

    The FT article on the bank of Mum and Dad was interesting – I actually got a loan from my parents to help with the deposit for my house, but I didn’t know if anyone else did anything like this. I’m treating it a bit like a second mortgage – there is an interest rate and a repayment plan and everything – though it’s all done on trust, there’s no official documents or anything. If I got into financial hardship I’d like to think my parents wouldn’t try and repossess my house!

    If I hadn’t had help from my parents it would probably have taken an extra 4 or 5 years of saving to get a deposit on a house so I’m very grateful (and very lucky) to be able to do that.

    I say on iretiredyoung.net they’re talking about helping their kids out with student fees and house deposits and I wonder how you fit that into your retirement plan. I guess you’ve just gotta increase that target net worth before you FIRE.

    Cheers, Wephway

  • 5 Stefan October 7, 2017, 2:24 pm

    Love the graphs you have been posting at the end of the News section every week, TI. They are always interesting to think about.

  • 6 Mr Optimistic October 7, 2017, 2:26 pm

    How about the bias inherent in the financial industry towards taking money off their clients ?
    Thanks for the hard work once again.
    Ps, re bank if mum and dad. Speaking from the donor side, two issues to throwing money at offspring are a) IHT, b) threat of some future gold-digger ripping you off. @ Welphway, think the latter 🙂

  • 7 John B October 7, 2017, 6:25 pm

    @Wephway is it visible to HMRC, who will want to tax your parents income? Having no documentation sounds very wise.

  • 8 hosimpson October 8, 2017, 10:30 am

    That HSBC’s new app is just another example of corporations’ pathological hoarding of data. Also, wherever there’s a regulation, there’s a way around it.
    HSBC already have information about many of their customers’ accounts with other credit institutions – they interrogate you each time you apply for any financial product – but current data protection laws don’t allow them to keep that information longer than is needed for the purpose for which it was obtained, not are they allowed to use it for anything else without consent.
    Enter: the app that will make it easier for HSBC to target their sales.
    And did the article really say that they were going to help people save by rounding up prices on their shopping and putting the change in a savings account? *Sigh*

  • 9 Wephway October 8, 2017, 11:04 am

    @John B

    Hi, so officially it was a gifted deposit for the house – when I bought the house my solicitor drafted up a letter for my parents to sign, saying it was a gift and they didn’t expect the money back. That’s why I say it’s all based on trust – I don’t have to pay my parents back if I decide not to as officially it’s my money (though it would be a pretty rubbish thing to do).

    It’s a pretty rudimentary agreement really, there is no documentation, just verbal agreements. I’m still a long way off paying them the principal amount so so far I haven’t really paid any interest – that is, we could just say it was a 0% interest loan (not sure what the taxman would say to that logic though?!). The reality is that my parents are sort of waiting to see if they need the interest (as well as the loan back) – they might decide one day actually they don’t need the interest as well and therefore there’d be no income to declare. IHT is sort of lurking in the background if that makes sense.

  • 10 Simon October 8, 2017, 1:29 pm

    @ Gaz

    I think you are right to be cautious. I haven’t added equity exposure in months.

  • 11 P October 8, 2017, 10:57 pm

    @Gaz, I changed this year from 0% to15% bonds age 49. That’s not to predict the future; merely saying what I did.

  • 12 A beta investor October 10, 2017, 7:34 am

    Whenever anyone says “beware because the market is at all time high” they are only ever looking at capital indices.
    Since the bulk of equity returns come from dividends the markets are always making new highs when measured on Total Return indices.

    It’s part of the financial media’s attempt to get you to do something when time, dividends and compound interest are all you need.

  • 13 AAJ October 10, 2017, 4:59 pm

    “I think you are right to be cautious”

    Why is everyone always so scared? Are valuations *really* that high? John’s FTSE 100 valuation back in July assured us that the FTSE 100 was “Almost at fair value”. Have I missed something? Has it gone through the roof since then?

  • 14 Hospitaller October 14, 2017, 5:03 pm

    @Gaz

    Many equity market indices are at or near record highs so I think caution would be sensible. I’ve built a stash to go play after there’s a correction or worse (not in cash but in shorter dated inflation-linked gilts given that Brexit has brought us some noticeable inflation).

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