Attribute Bias

You let the computer pick stocks for you. But not randomly...based on a certain set of conditions (like high yield or low risk, etc.), you’re likely to get a bunch of stocks that share more than just the characteristics of being high yield or low risk. They’ll also likely have other things in common, like being in the same industry or being companies that have similar business profiles or management philosophies.

Attribute bias is the tendency for those auto-selected securities to have more in common than you asked for. Let’s say you decide to use the built-in tool on your trading software that gathers a collection of securities that fit a certain profile you’re interested in (high-earning or stable or low risk, etc.). The bots inside your computer return a whole list that fit the profile to a T. When you go to buy some of those securities, you may be getting more than just a group of stocks that all fit the profile of "stable." You might be getting stable stocks that are all in tech or maybe agriculture or companies that have similar leadership styles.

It isn’t necessarily a bad thing, but it can lead to an un-diversified portfolio.