How Can I Minimize the Negative Effects of My Behavioral Biases?

Research shows that individuals investing directly in stocks or in mutual funds tend to have substantially lower returns than do comparable equity indices or the funds themselves. This underperformance is attributable mainly to human behavioral biases, either cognitive or emotional, which have long been the focus of behavioral finance literature. Of the many deficiencies researchers have identified, one of the most significant is loss aversion. That and other behavioral biases cannot be avoided, but their effects can be diminished.