07 5440 5794
|
Beware of recency bias - the trap that makes us overvalue recent events while ignoring the bigger picture.  Photo by Clem Onojeghuo on Unsplash Just a quick word on "Recency" bias. Recency bias is the tendency to place too much emphasis on experiences that are freshest in your memory. For example, would you want to go for a long ocean swim after watching Jaws? Probably not, even though the actual risk of being attacked by a shark is infinitesimally small. In the investing world, recency bias can be hard to avoid. Absolutely everyone is talking up property at the moment based on the events of the last few years, expecting that this will continue into the foreseeable future. People forget. I bought a 3 bedder in Taringa in 2008, which was a high point in the market. Up until a few years ago it wasn't worth much more than I paiod for it - it was a dog!! The only growth I've had has been in the last few years, which has been quite spectacular. However, my return over the holding period of 15+ years is only average. Even less if I count the negative gearing or cash flow loss. This is a reminder to me that just about everything is cyclical. When it comes to the future value of things, there's little we can be certain of, but these things I know to be true: Cycles prevail eventually. Nothing goes in one direction forever. Trees don’t grow to the sky. Few things go to zero. And insistence on extrapolating today’s events into the future can be very bad for investor health. The problem is that each cycle is different. So it’s very difficult to convince yourself that; a) The good times will eventually end OR b) The bad times won’t last forever. The key message here is don't overvalue recent events and remain focused on the big picture. Key Thoughts
Whenever you're ready....here are a few ways I can help you get on track to a stress-free retirement. 1. Follow us on Facebook and X and sign up to our regular email updates. They are great places for great ideas. 2. Complete your Financial Readiness quiz It can be hard to know if you’re doing well with your money or not, so we’ve taken the guesswork out of it for you. Take our quick quiz and work out if you’re doing all the right things with your money or need to pull your socks up, as well get some ideas about what you should be doing next. 3. Work directly with me. If you’d like to work with me and my team to move from stressed and frustrated to relaxed and on track, you can schedule a phone call here. You’ll find out how we can help and if we are the right fit for you. 20 minutes, no obligation. MPORTANT This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each individual and investor are different and you should not act on this information without speaking to a financial, tax or legal adviser, who can consider if the financial product and strategies are appropriate for you. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. See full Terms and Conditions here.
Case studies in this publication are for illustration purposes only. The investment returns shown in any case studies in this publication are hypothetical examples only and do not reflect the historical or future returns of any specific financial products. Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. Your comment will be posted after it is approved.
Leave a Reply. |
RSS Feed
31/10/2024
0 Comments