Information bias refers to a discrepancy that arises when the data collected or measured by an individual doesn’t accurately represent the inherent reality. This discrepancy can be attributed to various factors. It might be due to an unintentional mistake made during data collection or processing, a purposeful distortion of information, or could be a result of an unconscious inclination to manipulate information in a way that aligns with one’s personal needs or preconceived notions.
Video: https://www.youtube.com/watch?v=DgVMnoKWygc
Title of this video on YouTube is “Retailers already announce nearly 600 store closures in 2024”. The anchor starts off by saying that retails closed more than 5000 stores in 2023, and already announced 600 store closures in 2024 already, thus creating an information bias in our mind.
Common information biases
- Confirmation bias represents our inclination to find, interpret, and remember information that aligns with our existing beliefs, while disregarding contradictory data.
- Asymmetric information bias, on the other hand, refers to the scenario where one party in a transaction possesses superior information than the other.
- Recent events bias refers to the common misconception that recent events are likely to repeat soon, causing people to overlook older yet relevant information.
- Loss aversion bias suggests humans perceive losses significantly more intensely than similar gains.
As you can hear in the video above, CVS, Walgreens, Marshals, TJ Maxx, etc. are all shutting shop. This quickly creates a set of unfavorable prejudices or negative biases in your mind towards the future of these store chains. But if you dive further into the factual data, you’ll see that, while these corporations ended up closing some underperforming stores, CVS still has 9500+ stores and opened 6 new stores in 2023. Walgreens has almost 8600 locations, Marshals/TJ Maxx has 2513 stores, and 16 new stores debuted in the third quarter of 2023.
On the other hand, the video claims that Dollar Tree/Family Dollar and Dollar General are opening almost 1500 new locations combined. The fact is that both the corporations collectively have around 35,622 stores. Starting Q3-2023 and continuing into 2024, they plan to launch 997 new stores, while closing or relocating 128 locations.
Making an informed financial decision is therefore only possible by carefully examining objective, factual data. We often hear the question, “I hope you’re not buying a CVS,” but really, investing in the real estate of a high-performing CVS in a desirable area will pay off. Conversely, investing in a Dollar store real estate in small or tertiary markets, could prove to be a huge mistake. Here is the reason why…. above image shows a relocated Dollar General only few meters from its previous site. That might be the result of several factors, most of which are not in your control as a landlord, once you buy that real estate. However, you do have some influence over the situation by basing your investment decision on data and acquiring real estate with strong cash flow in a prime, dense location that may easily be re-tenanted.
How can you avoid information bias in investing?
- Diversifying your information sources, especially those you disagree with, may assist in balancing your investing approach and lessen the impact of a single piece of information.
- Minimize your exposure to social media and financial news. Although it’s important to stay informed, excessive exposure to financial news and social media posts could raise the possibility of information biases. Decide which sources to follow with objectivity, and limit time to monitor news.
- When making investment decisions, base them on objective analysis. Rather than reacting to short-term market movements or news events, focus on the real estate fundamentals in that area, tenant company’s long-term financial strength and business prospects. Don’t let fear or greed get in the way of long-term investment goals.
- Talk to a financial advisor or investment professional to help you make informed investment decisions.
Ref: https://www.investopedia.com/, http://thenationaldesk.com, https://northmarq.com/insights,
https://www.youtube.com/watch?v=DgVMnoKWygc
