Why do some people choose to actively manage their investments, even though it requires more work? (A question to answer on Quora by Pathik B. Variya)
It is a good question, an active one! So, the answer is a perceptual bias (perceptual shortcut / cognitive bias), called - “ACTION BIAS”.
We have been modelled (programmed, trained in a way) to believe that “keep doing something” is always better than “doing nothing”. A person, who is doing ‘nothing’, is viewed / perceived as lazy, useless in our society. This tendency forces us to always keep doing something.
For example, a person ‘X’ is making enough money from dividends and other passive sources. He simply enjoys his life doing “nothing”, literally speaking. He may be rich, even wealthy, and may be seeing his wealth rising phenomenally, despite doing nothing. Still, to a layman, such a person, is useless as he seems to be doing “nothing”.
Compare it to someone ‘Y’, who is doing all the hard work in share trading, managing his real estate portfolio and so on. He is always on the laptop, doing “something” (playing games, ah!).
Of course, many will believe that ‘Y’ is better than ‘X’, which is not necessary.
Other example is that of traffic. If you are caught in traffic and keep honking, believing that it will resolve the problem, then you are suffering from the action bias.
And when the same starts to work in your investment, you become “active”!
Original Answer by Me: https://qr.ae/prXFLv
