These days, with the help of the internet, ASX investors have endless facts and figures to wade through to guide their stock buying and selling.
Are interest rates going up or down? What about inflation? How's the unemployment rate? Is Australia's GDP growing fast enough?
The old cliche goes "knowledge is power".
But one expert is casting doubt on that axiom, arguing perhaps stock investors are getting too distracted by all the statistics.
Fidelity International investment director Tom Stevenson said recently that investors "should accept the limitations of what we know and think we can control".
"We should focus less on the backward-looking minutiae of economic statistics and more on the general direction of travel," Stevenson told UK's The Telegraph.
"For one thing, that could free up a lot of time to do some real thinking, which in the long run will serve us better than pouring over flaky data."
For him, studying reams of numbers only feeds into three delusions that ASX investors fall for:
Illusion of knowledge
The first delusion is "the illusion of knowledge", which Stevenson describes as "the misguided belief that more information is better information".
He cites behavioural research from the 1970s to demonstrate.
The study asked a group of experienced bookmakers to rank sets of racehorse data in order of importance. Then they were told to make race predictions first using the top five sources of data, then asked to do the same after the top 10, 20, then 40.
"The conclusion of the study was that the accuracy of the predictions remained almost unchanged the more information they had," said Stevenson.
"But the confidence in the forecasts doubled as the study's participants were given more data. Bookies, like investors, think that the more they know the better they can do their job. It's probably not true."
Illusion of control
The second illusion for many investors is control.
"It is human nature to think that we have agency over uncontrollable events," said Stevenson.
"For example, people are more likely to accept a bet on the toss of a coin before it has been flipped rather than afterwards when the outcome has been hidden. It's as if we think we can influence the coin while it's in the air."
He added that professional investors are especially prone to this delusion due to "intellectual vanity".
"Asked to decide which of two shares would outperform based on a set of facts, including past performance, a group of investment professionals did as badly as a group of lay people.
"However, they arrived via a different route. The lay people looked at the recent performance and were happy to admit they had guessed. The professionals naturally denied sticking a finger in the air and pretended to rely on 'other knowledge'."
Illusion of relevance
The final delusion is the illusion of relevance.
This most often manifests in anchoring, which is an irrational habit all ASX investors indulge in.
For example, because a stock was once $10 but now trades at $2, some may buy it thinking it could return to $10 someday.
But rationally, past performance has zero relevance to where a stock is headed in the future.
According to Stevenson, the ability to lie to ourselves can turn into absurd behaviour, like when a study asked people to name what percentage of countries are in Africa.
"They gave their answer shortly after being shown the spin of a rigged wheel of fortune with numbers from 1 to 100 but which only ever showed either 10 or 65.
"The average percentage guessed by those who saw 10 was 25%; those that were shown 65 guessed 45% on average. Faced with a question they didn't have a clue about, they simply clutched at an irrelevant number."
So remember these three delusions and let go of them next time you're making an investment decision.
