Psychologist Daniel Crosby wrote an article titled What the “Mona Lisa” Can Teach You About Investing Risk (8 October 2026).
« the Mona Lisa was considered a perfectly fine but unremarkable example of da Vinci’s work, hardly the most prized object in the building. What followed changed art history. [In 1911] as newspapers across the world began reporting on the theft, the painting became a global sensation. »
« Psychologists call this the mere exposure effect, the well-documented tendency to develop a preference for something simply because we have become familiar with it. Familiarity, by itself, generates positive feeling. The painting did not become beloved because it was special. It became special because it became familiar. This pattern has direct and often expensive consequences in financial life, because we routinely confuse familiarity with safety, and the unfamiliar with risk. »
« The clearest example is what researchers call home bias, the tendency for investors to overweight companies, regions, and assets they know personally. »
« The legendary investor Peter Lynch popularized the advice to “buy what you know.” With respect due to one of the great investors of his generation, this turns out to be unhelpful guidance for most ordinary investors. Our conservative nature already steers us toward the familiar. Adding “buy what you know” to a brain already biased in that direction tends to amplify the problem rather than correct it. »
« The bias even shows up at the level of stock tickers. Research has documented that investors perceive stocks with pronounceable tickers as less risky than stocks with difficult-to-pronounce tickers, holding all else equal. »
« The family that buys the same brand of insurance their parents used without ever comparing alternatives is paying for familiarity rather than fit. »
« The investor who recognizes home bias as a force operating in their own life can deliberately offset it. A simple rule of thumb: your equity allocation across countries should look more like global market weights and less like your home country flag. This is not because foreign stocks are guaranteed to outperform domestic ones. It is because the goal of diversification is to spread risk across genuinely different exposures, and concentrating in any single country, however familiar, is a meaningful concentration. »
Books by Danial Crosby
- The Soul of Wealth: 50 reflections on money and meaning (2024)
- The Behavioral Investor: How psychology shapes wealth, risk, and investment decisions (2018)
- The Laws of Wealth: Psychology and the Secret to Investing Success (2016)
