Let’s take a look at a problem known as the confirmatory bias.  It’s a shortcut in thinking, (often considered an error in thinking), in which people tend to favor information that confirms their pre-existing beliefs or hypotheses regardless of whether the information is true. 

This happens most often for emotionally-significant issues and for established beliefs.  For example, if I have a strong belief that banks are dangerous, I’ll probably keep my money in my mattress and selectively attend to all of the evidence in the news that will affirm my belief (e.g., “See, just look at the fraudulent practices they engaged in at Goldman Sachs!” and “Look how long the FDIC’s Failed Bank List is!”).

At the same time, I’ll interpret ambiguous information as supporting my position, and I’ll discredit information that does not fit with my belief.

The main problem with the confirmatory bias is that it will lead to overconfidence, which, in turn, may lead the individual to make disastrous decisions.  For instance, if I’m completely confident that my mattress beats the local savings and loan, there may be devastating consequences:

  1. I would lose out on any potential to earn interest on my money.
  2. My money would lose its “buying power” as inflation occurs over time.
  3. Someone might break into my house and steal my money.
  4. My back might hurt because the money might make my mattress lumpy.
  5. If no one knows where my money is, my mattress (and all of the hundred-dollar bills hidden inside) might end up being sold at a garage sale for $5 when I die.

The bottom line is that if you are unwilling to consider opinions or data that disconfirm your own beliefs, you could be missing out on opportunities that would ultimately help you achieve your financial goals.