Mental models for…

12 mental models for investing

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Most investing mistakes are psychology, not math. These mental models help you see the biases and base rates that quietly cost you money.

  1. Losses hurt about twice as much as gains feel good

  2. Money already spent should never decide what you do next

  3. You're only seeing the survivors

  4. Regression to the mean: extreme results drift back toward average

  5. Base-rate neglect: the vivid story makes you forget the odds

  6. Rare, unpredictable events shape history most

  7. Some things gain from disorder — that's antifragile

  8. Second-order thinking: always ask 'and then what?'

  9. The endowment effect: you overvalue what you already own

  10. Wealth is what you don't see

  11. The real cost of anything is what you give up for it

  12. The overconfidence effect: we're far surer than we are right

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