Confirmation Bias

Confirmation Bias is the tendency to actively seek out, remember, and over-weight information that confirms one's existing beliefs, while dismissing or under-weighting contradictory evidence. It silently destroys investment theses by turning research into post-hoc justification.

Plain-English example

An investor convinced PAYTM is a long-term winner reads every bull-case Twitter thread, listens to founder interviews on YouTube, and joins Telegram groups full of holders. Critical RBI orders, profitability concerns, and competitor analysis get scrolled past with "they don't understand the moat". Two years and a 70% drawdown later, the thesis was wrong — but the research process never let in the warning signals.

How confirmation bias shows up

• Following only bullish (or only bearish) commentators
• "Doing your own research" by Googling phrases that lead to confirming sources
• Dismissing short-sellers' reports as "FUD"
• Ignoring corporate-governance red flags in companies you already own

How to mitigate

Write a pre-mortem: "If this investment loses 50%, what would have caused it?" Actively follow 2-3 credible bears on every position. Use a "kill criteria" checklist defined before buying.

SEBI caveat

Even SEBI-registered analysts disclose biases — alignment with management or product-issuer. Always check whose interest is served by a report. Education only.

Related

See also Anchoring, Herd Behavior, Recency Bias.