The ABCs of behavioral biases: O-R
So many financial behavioral biases, so little time! Today, let’s take a few minutes to cover our next batch of biases: overconfidence, pattern recognition and recency. OVERCONFIDENCE What is it? No sooner do we recover from one debilitating bias, our brain can whipsaw us in an equal but opposite direction. For example, we’ve already seen […]
The ABC’s of behavioral biases: H-O
There are so many investment-impacting behavioral biases, we could probably identify at least one for nearly every letter in the alphabet. Today, we’ll continue with the most significant ones by looking at: hindsight, loss aversion, mental accounting and outcome bias. HINDSIGHT What is it? In “Thinking, Fast and Slow,” Nobel laureate Daniel Kahneman credits Baruch […]
The ABC’s of behavioral biases: F-H
Let’s continue our alphabetic tour of common behavioral biases that distract otherwise rational investors from making best choices about their wealth. Today, we’ll tackle: fear, framing, greed and herd mentality. FEAR What is it? You know what fear is, but it may be less obvious how it works. As Jason Zweig describes in “Your Money […]
The ABC’s of behavioral biases: A-F
Welcome back to our “ABCs of Behavioral Biases.” Today, we’ll get started by introducing you to four self-inflicted biases that knock a number of investors off-course: anchoring, blind spot, confirmation and familiarity bias. ANCHORING BIAS What is it? Anchoring bias occurs when you fix on or “anchor” your decisions to a reference point, whether or not […]
The ABC’s of behavioral biases: an introduction
By now, you’ve probably heard the news: Your own behavioral biases are often the greatest threat to your financial well-being. As investors, we leap before we look. We stay when we should go. We cringe at the very risks that are expected to generate our greatest rewards. All the while, we rush into nearly every […]
Why Perspective Matters
I often say that one of our primary roles as an advisor is to provide context and perspective for clients, allowing us to collaboratively make better decisions. Behavioral economists have identified narrow framing as the tendency for investors to make decisions without considering the big picture or long-term effect on their portfolio. This behavior can […]
Do You Suffer from “Narrow Framing”?
Oftentimes, many investors get caught up in short-term results rather than looking at the big picture. This is known to behavioral economists as “narrow framing,” or “a tendency to see investments without considering the context of the overall portfolio.” Unfortunately, this idea can lead to many missed opportunities for investors. Narrow framing can cause investors to either […]
Market Timing – A Losing Game
The stock market crash of 2008-2009 is a very recent memory for many investors who still bear the scars from the experience. At Rockbridge, we also have prospective clients who walk into our offices saying that they haven’t recovered yet from the financial pain their portfolio endured over those several months. Why? It’s usually a […]
Market Commentary- November 2016
Markets in November The campaign is finally over and Donald Trump won. Markets respond to surprises and this result was one. Tuesday night I, along with many others, anticipated a starkly negative response. Yet, most, but not all, stocks went up and have generally stayed there. Domestic small company stocks and value stocks responded big […]
Post-Election Reflections
Whether you find the election results exciting or shocking, we are now faced with the question, “What’s next?” With respect to your investments, here’s a quick reminder of how we feel about that: Ample evidence informs us that it is unwise to alter your long-term investment strategy in reaction to breaking news, no matter how […]
