Being well-informed is not enough, seek opposing views in investing

My client Girish is the chief financial officer (CFO) of a large company and closely tracks global markets. He sought my opinion on investing a sizeable amount in silver, convinced that “all the pundits were extremely bullish on it”. My own reading suggested that while some experts were indeed touting silver as a hot investment, many were expressing caution or outright scepticism about its prospects. What puzzled me was not a difference of opinion about where silver might go, but how two well-informed people could arrive at such different conclusions about what experts were actually saying.

 

Girish’s belief that “all pundits were bullish on silver” did not arise from ignorance; he had read extensively before forming his view. What he had done, unknowingly, was to focus on material that supported his opinion while missing or dismissing commentary that challenged it. That was when the penny dropped. Like most investors, when Girish went looking for information, he was not really looking to learn. He was looking for reassurance that his initial belief was correct.

 

This behaviour has a name: Confirmation bias. It is not a modern flaw created by markets or media, but a deep-seated human trait with evolutionary roots. Confirmation bias helped humans survive because it favoured action over endless doubt. Early human groups lived with constant danger and little reliable information. Once a belief took hold — about danger, food, or leadership — it was often safer to stick with it than to keep questioning it. If movement in the bushes was believed to signal a predator, reacting with fear often kept people alive, while pausing to analyse every instance could prove costly. Information suggesting it was “probably just the wind” created doubt and disagreement, delaying action at the worst possible moment. Over time, the human mind evolved to filter out opinions that challenged existing beliefs. A trait that once ensured survival by promoting speed and cohesion now shows up as confirmation bias. Social media has greatly amplified this tendency. Algorithms learn what we agree with and feed us more of the same, creating an echo chamber (“everyone thinks like this”) in which dissenting voices appear fringe or irrelevant.

 

While survival is no longer at stake, confirmation bias continues to shape our behaviour — especially as investors. Investing is particularly vulnerable to confirmation bias because it combines uncertainty, emotion, social standing, and delayed outcomes. Markets rarely offer immediate feedback; a belief can feel validated for years before being proved wrong. Confirmation bias creates conviction and eggs on quick action. That quick action can lead to return-chasing, excessive concentration, and the abandonment of disciplined asset allocation. The bias that once helped humans act decisively can now push investors to act confidently in the wrong direction.

 

Confirmation bias cannot be eliminated; it is hard-wired. But it can be managed. Awareness of the bias is a powerful first step because it changes how we respond to the impulse to act. Awareness creates a pause — and in investing, unlike early human survival, a pause is rarely fatal. If that pause is used deliberately to seek out data or opinions that challenge one’s view, it has an additional benefit. Actively engaging with opposing arguments trains information feeds differently. Instead of being shown only one side of the story, investors continue to see a range of views. In contrast, investors who repeatedly consume only confirming opinions, as Girish initially did, quickly find their feeds narrowing until dissenting perspectives virtually disappear. Decisions made after being tested against contrary evidence are easier to stick with during periods of uncertainty. Decisions driven purely by instinct and reassurance, by contrast, are often reversed when the narrative shifts.

 

Truth be told, Girish came close to acting on confirmation bias without realising it. By seeking my opinion, he created a pause — and that pause changed the outcome. This is where advisors matter: Not because they predict markets, but because they help investors slow down, test their convictions, and replace intuitive decisions with deliberate ones.

 

The writer heads Fee-Only Investment Advisors LLP, a Sebi-registered investment advisor; X: @harshroongta