--- title: 3 Biases That Can Sabotage Your Wealth description: Discover the 3 biases that can sabotage your wealth and learn how to counteract their influence. Explore anchoring, loss aversion, and herd behavior in financial decision-making. Find out how to make smarter choices and achieve your financial goals. image: https://amgwealthadvisors.com/hubfs/Imported_Blog_Media/ezgif-2-f6ee3d3d76.jpg --- [![Logo](https://amgwealthadvisors.com/hubfs/AMG-Logo-Primary-Vertical-Texas-Oak.svg)](https://amgwealthadvisors.com/) - About Us - [Our Team](https://amgwealthadvisors.com/our-team) - [Why Choose Us](https://amgwealthadvisors.com/why-choose-us) - [Our Services](https://amgwealthadvisors.com/services) - [Asset Management](https://amgwealthadvisors.com/services/asset-management) - [Business Succession Planning](https://amgwealthadvisors.com/services/business-succession-planning) - [Estate Planning](https://amgwealthadvisors.com/services/estate-planning) - [Financial Transition Planning](https://amgwealthadvisors.com/services/financial-transition-planning) - [Retirement Planning](https://amgwealthadvisors.com/services/retirement-planning) - [Tax Planning](https://amgwealthadvisors.com/services/tax-planning) - Who We Serve - [Our Comprehensive Approach](https://amgwealthadvisors.com/our-comprehensive-approach) - [Our Clients](https://amgwealthadvisors.com/our-clients) - [Affluent Individuals & Families](https://amgwealthadvisors.com/who-we-partner-with/affluent-individuals-families) - [Family Businesses & Entrepreneurs](https://amgwealthadvisors.com/who-we-partner-with/entrepreneurs) - [Mid-Career Investors](https://amgwealthadvisors.com/who-we-partner-with/mid-career-investors) - [Women in Financial Transition](https://amgwealthadvisors.com/who-we-partner-with/women-in-financial-transition) - COI Partners - [Our Collaborative Approach](https://amgwealthadvisors.com/who-we-partner-with/our-collaborative-approach) - Our Professional Partners - [Business Appraisers](https://amgwealthadvisors.com/who-we-partner-with/business-appraisers) - [CPAs](https://amgwealthadvisors.com/who-we-partner-with/cpas) - [Estate Attorneys](https://amgwealthadvisors.com/who-we-partner-with/estate-attorneys) - [Exit Planning & Advisors (CEPA)](https://amgwealthadvisors.com/who-we-partner-with/exit-planning-advisors-cepa) - [Trust Officers](https://amgwealthadvisors.com/who-we-partner-with/trust-officers) - Resources - [Blog](https://amgwealthadvisors.com/knowledge/blog) - [Newsletters](https://amgwealthadvisors.com/knowledge/resources-for-you) - Client Login - [Black Diamond](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#black-diamond) - [Goal Plan](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#goal-plan) - [Schwab Alliance](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#schwab-alliance) [Let’s Get Started](https://amgwealthadvisors.com/contact) - About Us - [Our Team](https://amgwealthadvisors.com/our-team) - [Why Choose Us](https://amgwealthadvisors.com/why-choose-us) - [Our Services](https://amgwealthadvisors.com/services) - [Asset Management](https://amgwealthadvisors.com/services/asset-management) - [Business Succession Planning](https://amgwealthadvisors.com/services/business-succession-planning) - [Estate Planning](https://amgwealthadvisors.com/services/estate-planning) - [Financial Transition Planning](https://amgwealthadvisors.com/services/financial-transition-planning) - [Retirement Planning](https://amgwealthadvisors.com/services/retirement-planning) - [Tax Planning](https://amgwealthadvisors.com/services/tax-planning) - Who We Serve - [Our Comprehensive Approach](https://amgwealthadvisors.com/our-comprehensive-approach) - [Our Clients](https://amgwealthadvisors.com/our-clients) - [Affluent Individuals & Families](https://amgwealthadvisors.com/who-we-partner-with/affluent-individuals-families) - [Family Businesses & Entrepreneurs](https://amgwealthadvisors.com/who-we-partner-with/entrepreneurs) - [Mid-Career Investors](https://amgwealthadvisors.com/who-we-partner-with/mid-career-investors) - [Women in Financial Transition](https://amgwealthadvisors.com/who-we-partner-with/women-in-financial-transition) - COI Partners - [Our Collaborative Approach](https://amgwealthadvisors.com/who-we-partner-with/our-collaborative-approach) - Our Professional Partners - [Business Appraisers](https://amgwealthadvisors.com/who-we-partner-with/business-appraisers) - [CPAs](https://amgwealthadvisors.com/who-we-partner-with/cpas) - [Estate Attorneys](https://amgwealthadvisors.com/who-we-partner-with/estate-attorneys) - [Exit Planning & Advisors (CEPA)](https://amgwealthadvisors.com/who-we-partner-with/exit-planning-advisors-cepa) - [Trust Officers](https://amgwealthadvisors.com/who-we-partner-with/trust-officers) - Resources - [Blog](https://amgwealthadvisors.com/knowledge/blog) - [Newsletters](https://amgwealthadvisors.com/knowledge/resources-for-you) - Client Login - [Black Diamond](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#black-diamond) - [Goal Plan](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#goal-plan) - [Schwab Alliance](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#schwab-alliance) [Let’s Get Started](https://amgwealthadvisors.com/contact) ## Redirect Notice - Black Diamond Portal You are now leaving AMG Wealth Advisor's website and will be entering the SS&C Advent Black Diamond Wealth Platform ("Black Diamond") website. [Continue](https://login.bdreporting.com/Auth/SignIn) [Cancel](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#!) ## Redirect Notice - Goal Plan Portal You are now leaving AMG Wealth Advisors' website and will be entering the MoneyGuidePro® Client Portal (“Goal Plan”) website. [Continue](https://www.moneyguidepro.com/ifa/Guests.aspx?gst=AAAFA2234E34158E4B85DD6AE8913117691E361E5786D48AD703FAFE0C9FB31C) [Cancel](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#!) ## Redirect Notice - Schwab Alliance You are now leaving AMG Wealth Advisors' website and will be entering the Charles Schwab & Co., Inc. (“Schwab”) website. [Continue](https://client.schwab.com/Login/SignOn/CustomerCenterLogin.aspx) [Cancel](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#!) ![3 Biases That Can Sabotage Your Wealth](https://amgwealthadvisors.com/hubfs/Imported_Blog_Media/ezgif-2-f6ee3d3d76.jpg) - [All Posts](https://amgwealthadvisors.com/knowledge/blog) - [Financial Planning](https://amgwealthadvisors.com/knowledge/blog/tag/financial-planning) - [Market Commentary](https://amgwealthadvisors.com/knowledge/blog/tag/market-commentary) - [Trusts](https://amgwealthadvisors.com/knowledge/blog/tag/trusts) - [Estate Planning](https://amgwealthadvisors.com/knowledge/blog/tag/estate-planning) - [Financial Planning vs Wealth Management](https://amgwealthadvisors.com/knowledge/blog/tag/financial-planning-vs-wealth-management) - [Wealth Management](https://amgwealthadvisors.com/knowledge/blog/tag/wealth-management) - [Wills](https://amgwealthadvisors.com/knowledge/blog/tag/wills) Aug 16, 2023 # 3 Biases That Can Sabotage Your Wealth ![author avatar](https://amgwealthadvisors.com/hubfs/Team%20Member%20Photos/headshot-lori-gann-morris.jpeg) #### Lori Gann Morris, CIMA®, AIF®, CeFT®, Co-Founder / Managing Partner   Making financial decisions can often be more challenging than it appears. A variety of subtle influences can cloud our judgment. Among these, behavioral biases like anchoring, loss aversion, and herd behavior have been found to shape our choices significantly. In this article, we’ll explore each of these biases and ways to counteract their influence. ## Anchoring Anchoring is similar to when a catchy tune gets stuck in your head but with numbers instead of lyrics. We tend to latch onto the first piece of information we come across and allow it to guide our future decisions.1 Retailers often exploit our propensity for anchoring. For example, a “sale” price alongside the “regular” price can make you perceive a product as a bargain, even if it’s selling for its actual value. Consider a situation where you purchase a stock at a specific price, and it starts to drop. Logic might dictate that selling is the prudent choice, but instead, you hang on, hoping it will rebound to the original price. Conversely, anchoring can lead to overconfidence in a stock that’s performed well in the past. You may overlook the stock’s actual value and hold onto it for too long due to your fixation on previous gains. ## Loss Aversion Imagine finding a $100 bill on the street. It’s a pleasant surprise. Now imagine losing a $100 bill you had in your pocket. This incident would likely feel far worse. For most of us, the sting of loss is stronger than the joy of gain. 2 Loss aversion can result in overly cautious behavior, such as saving money instead of investing it, even though inflation may reduce its value over time. It might also lead you to hold onto losing investments, hoping for a recovery and risking more significant losses. In extreme cases, this bias can even influence career decisions, with people remaining in unfulfilling or stagnant jobs due to fear of potential loss associated with a career change. ## Herd Behavior Drawn from our instinct to follow the crowd, it can lead us to make decisions based on what others are doing rather than through our research and judgment. This tendency can lead to financial bubbles and severe market crashes. 3 Herd behavior often manifests during periods of market hysteria, either bullish or bearish. For instance, during a market rally, investors may be tempted to join the buying frenzy, driven by the fear of missing out. Conversely, in a market downturn, the same investors might sell off their holdings in panic just because everyone else is doing so. Getting swept up in these trends may derail your investment plan and lead to quick decisions that don’t match your financial goals or risk tolerance. ## Taking Action Awareness is the first step to overcoming these biases. Recognize their presence and dig deeper in your research to avoid anchoring, manage feelings of loss aversion, and resist the pull of the herd. Also, having a clear investment plan can help mitigate these biases. By predetermining conditions for selling or buying stocks, you may be able to lessen the potential influence of your emotions on your decisions. Lastly, it’s also worth considering working with a financial advisor. An objective outside perspective can help navigate these biases and offer strategies for dealing with them. Behavioral biases like anchoring, loss aversion, and herd behavior are inherent in human decision-making. However, you can start to counteract these biases through increased awareness, sound financial planning, and guidance from a financial professional. Share: Wealth Management Can Be A Challenge. Learn How We Can Help. [Let's Get Started](https://amgwealthadvisors.com/contact) #### Disclosures All Investment Advisory Services are provided by Waterloo Capital d/b/a AMG Wealth Advisors, an SEC Registered Investment Adviser. Registration with the SEC does not imply a certain level of skill or expertise. AMG Wealth Advisors is not affiliated with Waterloo Capital. Additional information about Waterloo Capital d/b/a AMG Wealth Advisors, is available in its current disclosure documents, Form ADV Part 1A, Form ADV Part 2A Brochure, and Client Relationship Summary, which are accessible online via the SEC’s investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov. Waterloo Capital does not offer or provide legal or tax advice. Please consult your attorney and/or tax advisor for such services. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal any historical performance level. Hyperlinks are provided as a courtesy and should not be deemed as an endorsement. When you link to a third-party website you are leaving our site and assume total responsibility for your use or activity on the third-party sites. ![AMG Wealth Advisors](https://amgwealthadvisors.com/hubfs/MG%20(1)-1.png) T: 512.647.1500 TF: 800.266.1723 1221 South Mopac Expressway, Suite 240 Austin, Texas 78746 [![linkedin](https://amgwealthadvisors.com/hubfs/ln.png)](https://www.linkedin.com/company/amg-wealth-advisors/) [![Instagram](https://amgwealthadvisors.com/hubfs/Instagram%20(1).png)](https://www.instagram.com/amgwealthadvisors/) All Investment Advisory Services are provided by Waterloo Capital d/b/a AMG Wealth Advisors, an SEC Registered Investment Adviser. Registration with the SEC does not imply a certain level of skill or expertise. AMG Wealth Advisors is not affiliated with Waterloo Capital. Additional information about Waterloo Capital d/b/a AMG Wealth Advisors, is available in its current disclosure documents, Form ADV Part 1A, Form ADV Part 2A Brochure, and Client Relationship Summary, which are accessible online via the SEC’s investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov. Waterloo Capital does not offer or provide legal or tax advice. Please consult your attorney and/or tax advisor for such services. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal any historical performance level. Hyperlinks are provided as a courtesy and should not be deemed as an endorsement. When you link to a third-party website you are leaving our site and assume total responsibility for your use or activity on the third-party sites. - ABOUT AMG - [Our Team](https://amgwealthadvisors.com/our-team) - [Why Choose Us](https://amgwealthadvisors.com/why-choose-us) - KNOWLEDGE - [Blog](https://amgwealthadvisors.com/knowledge/blog) - [Resources For You](https://amgwealthadvisors.com/knowledge/resources-for-you) - PARTNER WITH US - [Entreprenuers](https://amgwealthadvisors.com/who-we-partner-with/entrepreneurs) - [Women in Financial Transition](https://amgwealthadvisors.com/who-we-partner-with/women-in-financial-transition) - [Affluent Families & Individuals](https://amgwealthadvisors.com/who-we-partner-with/affluent-individuals-families) - [Mid-Career Investors](https://amgwealthadvisors.com/who-we-partner-with/mid-career-investors) - INVESTOR LOGIN - [Black Diamond](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#black-diamond) - [Goal Plan](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#goal-plan) - [Schwab Alliance](https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth#schwab-alliance) © AMG Wealth Advisors. All Rights Reserved. [Privacy Policy](https://waterloo-public.sfo3.digitaloceanspaces.com/Waterloo%20Privacy%20Policy%20122225.pdf) [Client Relationship Summary](https://waterloo-public.sfo3.digitaloceanspaces.com/AMG%20wealth%20Advisors%20Form%20CRS.pdf) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Lori Gann Morris, CIMA®, AIF®, CeFT®, Co-Founder / Managing Partner", "url" : "https://amgwealthadvisors.com/knowledge/blog/author/lori-gann-morris" }, "dateModified" : "2023-11-22T01:16:15.315Z", "datePublished" : "2023-08-16T04:00:00.000Z", "headline" : "3 Biases That Can Sabotage Your Wealth", "image" : [ "https://amgwealthadvisors.com/hubfs/Imported_Blog_Media/ezgif-2-f6ee3d3d76.jpg" ], "mainEntityOfPage" : { "@id" : "https://amgwealthadvisors.com/knowledge/blog/3-biases-that-can-sabotage-your-wealth", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://amgwealthadvisors.com/hubfs/AMG-Logo-Primary-Horizontal-Texas-Oak.svg" } } } ```