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Definition of Confirmation Bias Confirmation bias is our natural tendency to search for, believe, and remember information that supports what we already think is true—while ignoring anything that challenges our opinion. When it shows up in money decisions, it can push us into bad investments, risky purchases, or just plain stubborn financial mistakes because we convince ourselves we’re already right.

A Simple Definition of Anchoring A behavioral bias where we fixate on an initial price, value, or piece of information and use it to make ongoing decisions—often leading to bad financial choices.

Definition of Overconfidence Overconfidence (in finance) is a behavioral bias where investors believe they have better knowledge, sharper instincts, or more accurate predictions than they actually do. This confidence leads them to take bigger risks, ignore danger signs, and make decisions based on gut feelings instead of solid strategy.

Definition of Loss Aversion Loss aversion describes our natural tendency to hate losing money more than we enjoy gaining money. In fact, most people feel the pain of a loss about twice as strongly as the joy of a gain. That emotional imbalance leads many folks to make defensive, fearful, or flat-out irrational money decisions.

Definition of Behavioral Finance Behavioral finance is the study of how our emotions, habits, and quirks influence our financial decisions. In a perfect world, people would invest, save, and spend based on facts and logic. But we don’t—we’re human. We tend to follow the crowd, panic when markets dip, overspend when we’re stressed, and cling to bad investments because we “feel” they’ll bounce back.