◈ GLOSSARY · MONEY MINDSET
Overconfidence Bias.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
Believing your judgment, stock picks, or market timing is better than it actually is. Surveys consistently find that 70-80% of active traders think they'll beat the market; the long-run data says roughly 10-20% actually do after fees and taxes. The honest caveat: a few wins early on are the most dangerous thing that can happen to a new investor, because they're usually mistaken for skill.
◈ IN PRACTICE
Example
You buy three stocks and two of them double in a year. You conclude you've got a knack for this, quit your boring index fund plan, and start trading actively. Five years later your portfolio trails the S&P 500 by 4% a year — a gap that, on $100K, costs you roughly $25K over that stretch.
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