Hindsight bias is a psychological trait which leads to investors overestimating their predictive abilities. Many pundits have claimed that stock market meltdowns like the dotcom bubble and global financial crisis of 2008 could have been predicated based on stock valuations. But the magnitude of these corrections was largely unexpected; if many people knew beforehand that stock prices would crash, then crash would not have been so severe, which means that the explanation of these crises had the benefit of hindsight.
In all the three examples, the results were favourable for you. But just because the results were what you wanted does not make you a cricket, political or investment expert. It was a matter of chance and you were lucky. Restricting ourselves to the domain of investments, you must realize that there is an element of unpredictability or randomness in price movements in general and price outcomes of different events. Beware of people you always claim that they knew what would happen. We are not saying that they are consciously lying or they are frauds; they have the behavioural trait of hindsight bias.
People explain events post facto using the benefits of hindsight, but this bias leads people to believe that such events are more predictable than they really are. It can lead to the following negative consequences:-
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