Illusory Superiority

Illusory superiority is a behavioral concept in which people believe they are above average in traits such as intelligence, relationship status, professional achievement, and driving. Obviously, everyone cannot be above average. But one area that many people do not believe they are above average is investing skills. As a result, investors tend to either hire a money manager, or invest on their own. Advice from money managers can be expensive and eat into your return. Additionally, if you go this route, you must be cautious as there are unscrupulous advisors and outright scam artists. We should note that there are also reputable money managers who can help you. By investing on their own, investors often find themselves chasing stock returns. Small investors often suffer from overconfidence, which typically involves a lot of buying and selling, racking up trading costs and taxes. We hope your education and this textbook has prepared you on your journey to becoming and educated investor.