[Summary]
Status quo bias is the psychology of avoiding change and continuing with the current status quo.
The status quo bias is not only a matter of reading market prices, but also a material for checking where you tend to get impatient.
In actual investment, the first step is to regularly update the reasons for continuing to hold the stock. However, we cannot overlook the fact that we will not be able to respond to environmental changes.
In this article, we will organize status quo bias not as "knowledge" but as a step to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First, distinguish based on status quo bias.
When looking at status quo bias, first separate what you want to judge. The information you need changes depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. Status quo bias is not the only factor in determining decisions. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Status quo bias and emotional misalignment
If we look at the status quo bias as an investment psychology, we first need to make narrow assumptions. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
If you check the following points, things will be much more organized.
| Axis to check | Viewing with status quo bias |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
Status quo bias doesn't only stumble when you lack knowledge. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Record your feelings of impatience and relief when you see status quo bias.
- Write down the same number of reasons why you want to buy and reasons why you don't.
- Wait a day before making decisions after unrealized losses or sudden rises.
- Reduce trading amounts on days when emotions are strong
The important thing here is not to settle on one correct answer based solely on the status quo bias. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before using status quo bias as a basis for making an actual decision, check at least these five things.
- Can you explain in one sentence the purpose of looking at status quo bias?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of checking for status quo bias is not to act faster, but to reduce unnecessary errors in judgment.
Summary
Status quo bias is a material for organizing investment decisions. Even if you read it as an investment psychology, if you treat it as a standalone buy or sell signal, your judgment will be inaccurate.
The points to keep in mind are as follows.
- Decide first the purpose of looking at status quo bias.
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. It is realistic to treat the status quo bias as a tool to pause before buying or selling, rather than a word that forces you to make a hasty decision.