Selective Memory in Portfolio Managementby Kurt Box
Overconfidence is often caused by selective memory. We remember our successes but forget our failures. It's one reason why we usually (if we are willing to open our eyes) learn the most from our failures, not our successes. How does this apply to investing? An investor who remembers only his or her investing successes will likely have built up more (unjustified) confidence than an investor who remembers the effects of all portfolio moves, both good and bad. Selective memory can allows investors to repeat the same mistakes again and again instead of learning a valuable lesson the first time.