As clients invest for retirement, even the most thoughtful may be impaired by ‘recency bias.’ This shows up in statements like, “How did my portfolio do last month?” or “Hey, the S&P 500 is averaging 20% for the past three years; why didn’t my portfolio do that well?”
“Recency bias” is a state of mind where our views are most influenced by what we have experienced most recently. This colors our outlook and expectations of the future. The last book we read is the one we’re most likely to talk about; the bad taxi ride we just experienced is the one we describe to others.
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