Spring 2018 Newsletter

TCI

Mar 13, 2018

Most people like to think they are rational when it comes to investing but even the most sophisticated investors are still susceptible to behavioral biases. It’s nature. As human beings, we are motivated by fear and greed and losing money is something we physically equate with danger.

One of the big biases we suffer from is recency bias. We tend to use our recent experience as the baseline for what will happen in the future. When markets are good we start to forget about market corrections. We might even start to wonder why we aren’t taking on more risk since the market continues to climb. Then it doesn’t. If we aren’t primed for that moment, we are shocked and wonder how we missed the bubble.

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