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This analysis uncovers the cognitive biases affecting investment decisions, suggesting a need for clearer understanding of risk and return.
This paper examines persistent myths in private investing by systematically uncovering the implicit assumptions underlying common notions of risk, safety, return, and money itself. Rather than proposing an alternative investment strategy, the contribution consists of a conceptual analysis of the cognitive structures through which seemingly plausible simplifications—rooted in nominal benchmarks, linguistic shortcuts, institutional conventions, and cognitive biases—come to shape investment behavior over time. Drawing on insights from financial economics, behavioral finance, and market theory, the paper shows how terms such as “safe,” “passive,” “risk-free,” or “well diversified” acquire meanings that extend beyond their formal definitions. These interpretations persist less because they are empirically valid than because they are intuitively appealing, reinforced by retrospective narratives, and confirmed through selective experience. As a result, many investment beliefs remain remarkably stable even when their underlying assumptions are rarely made explicit and often fail to hold. The analysis demonstrates how functional abstractions harden into implicit certainties, how ex post explanations create an illusion of predictability, and how nominal reference points systematically distort perceptions of risk and wealth. The paper thereby delineates the limits of widely used conceptual models and identifies the conditions under which their explanatory power diminishes. Its aim is to enable a more coherent understanding of investing under uncertainty—one that recognizes ambiguity as a structural feature rather than obscuring it behind reassuring terminology.
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Walter Hipp (2026) studied this question.
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