Some thoughts to ponder: Anchoring bias From an investment...

Some thoughts to ponder:
Anchoring bias
From an investment perspective, one obvious anchor is the recent share price. Many people base their investment decisions on the current share price relative to its trading history. In fact, there is an investment school of thought (called technical analysis, an amusing term in itself) that bases investing on charting share prices. Unfortunately, where a share price has been in the past presents no information as to whether a stock is cheap or expensive. We base our investment decisions on whether the share price is trading at a discount to our assessment of intrinsic value and we have no regard as to where the share price has been in the past. We also have little regard to the prevailing share price in deciding to invest the time to research a new investment opportunity. Share prices change and we want to have a range of well-researched investment opportunities so that we can act on an informed basis when prices move below our assessment of intrinsic value.
Hamish Douglass