Research shows that many of our financial decisions occur below the level of conscious awareness. The Nobel Prize-winning economist Herbert Simon’s idea of bounded rationality reminds us that we do not optimise all our decisions through perfect analysis, we simply lack the cognitive capacity to gather and process all relevant information. Instead, we frequently satisfice, meaning we make choices that feel good enough. Building on this, Tversky and Kahneman demonstrated that under uncertainty we often rely on heuristics: rapid mental shortcuts that once helped us survive but can introduce systematic biases in modern markets. This introduces challenges due to our tendency to identify patterns in randomness, overreact to recent events, and mistake familiarity for safety.

By the time we believe we are evaluating an investment rationally, our unconscious mind has often already shaped our judgment emotionally. These automatic processes are not flaws, they served our species well evolutionarily but they can systematically mislead us in modern portfolio decisions. Awareness alone rarely changes these instincts. Knowing about confirmation bias does not prevent us from seeking information that supports our view. The real challenge is to design systems that work with, rather than against, our cognitive wiring, structuring decision processes that help channel these automatic responses in more constructive directions.