One of the most robust, and most practically useful, findings in behavioral finance is also one of the most counterintuitive: more information is associated with worse investment performance. It cuts against the natural assumption that a better-informed investor should make better decisions, and it forces a harder question, which is what kind of information actually improves outcomes, and what kind just breeds overconfidence, excessive trading, and the other behavioral habits that quietly erode returns.
The classic demonstration comes from Paul Slovic's study of horse racing handicappers. Give them more information about the horses and the races, and their confidence in their own predictions rose substantially. Their actual accuracy stayed flat. Each extra piece of information bought them more certainty and not a shred more accuracy, and investment research has since found the same pattern in financial markets. More information makes investors feel better-informed. It doesn't make them more accurate, and the confidence it manufactures shows up as larger position sizes and more frequent trading, both of which correlate with worse returns.
The mechanism turns on the gap between information that's genuinely decision-relevant and information that just feels like understanding without adding any real predictive power. Most of what the more-informed investor knows on top of everyone else falls into the second bucket: detailed knowledge of a company's products and its management's style, deep familiarity with industry dynamics, close attention to macroeconomic commentary, careful study of historical price charts. Each of these delivers a comprehensive-feeling picture. None of them reliably translates into better predictions of where the price goes next, because the market has already absorbed the same information and priced it in.
The added confidence is precisely the danger here. An investor who has done extensive research on a company feels more certain about its prospects than one who has done less, even though the extensive research hasn't actually bought her any meaningfully better insight into where the stock is headed. That extra certainty drives position sizes larger than the real information advantage justifies. It drives more active trading in response to news the less-informed investor would simply ignore. And it drives more stubborn resistance to contrary evidence, because all that research has built a strong personal commitment to the original thesis.
The kind of information that actually improves outcomes looks nothing like what most investors accumulate. What's useful for long-term investing is a deep understanding of business economics and competitive dynamics, a rigorous valuation framework, real knowledge of financial history and market cycles, and an honest read on one's own psychological biases. None of that comes from reading more financial news or doing more detailed short-term research. All of it develops slowly, through study and lived experience, and it genuinely improves the quality of an investor's judgment, without generating the false confidence that a steady diet of market information produces.