Survivorship bias happens when a person makes a flawed conclusion based on the result of a few and successful scenario. For example, you will hear about people who became rich by buying individual stocks or day trading and you might be convinced that it’s easy to do. This could entice you to trying it and then finding out later that it’s not easy. For every person who made money in speculating the stock market, there are many more who didn’t. We usually just hear about people who won and made it big but we seldom hear about the many who lost their money after gambling or making very risky investments.
As I mentioned in my previous notes, reward and losses are directly proportional to risk. You have to be wary when hearing success stories that seem like an easy thing to achieve since it could make you take unnecessary risks and derail your goal of becoming financially successful. Be happy when someone really made a lot of money by taking a lot of risk but don’t be jealous of them. They made money by taking risks that could have turned out really bad for them as what definitely happened to many who also did the same. Look at the statistics and always include it as an input to your decision making as well as your risk tolerance.