Hindsight bias is a psychological phenomenon in which a person becomes convinced that he accurately predicted an event before it happened.
It causes over-confidence in one’s ability to predict other future events and may lead to unnecessary risks.
Hindsight bias can adversely affect decision making.
In investing, hindsight bias can manifest as feelings of disappointment or regret that you didn’t take action prior to an event that would change the market.
One way to manage hindsight bias is to document the decision-making process with a journal (such as an investment diary).
Risk acceptance or risk containment is a conscious strategy of recognizing the possibility of small or rare risks without taking measures to hedge, hedge or avoid these risks.
Arbitrageurs are investors who exploit market inefficiencies of any kind. They are necessary to ensure that inefficiencies between markets are smoothed out or kept to a minimum.
Asset-Backed Securities (ABS) are financial securities backed by income-producing assets such as credit card receivables, home equity loans, student loans, and auto loans.
Audit risk is the risk that the financial statements will be materially incorrect, even if the auditor’s report indicates that the financial statements do not contain any material misstatement.
A beneficial owner is a person who enjoys the benefits of ownership, despite the fact that the ownership of the property is registered in a different name.
The bid-ask spread is the difference between the highest price a buyer is willing to pay for an asset and the lowest price a seller is willing to accept.
The Bloomberg terminal, developed by businessman Michael Bloomberg, is a popular hardware and software system that allows investors to access real-time market data, investment analytics and their own trading platforms.