Cognitive Errors in Investment Decision-Making

As a portfolio manager, you are tasked with constructing a diversified investment portfolio for a high-net-worth individual (HNWI) who has expressed a strong preference for sustainable and socially responsible investments. During the initial meeting, the client shares their recent investment experiences, reporting significant gains in their technology stocks, yet has a notable aversion to investing in energy sectors due to a documentary they watched.

In this scenario, discuss the cognitive errors that may affect the client's investment decision-making process. Specifically, identify three cognitive errors and explain how they can lead to suboptimal investment choices. Furthermore, recommend strategies to mitigate these cognitive biases and help the client construct a more balanced portfolio that aligns with their goals while remaining aware of potential biases.