Recency Bias: When Yesterday’s Market Becomes Tomorrow’s Mistake
It’s natural to assume the future will look like the recent past. After a long market rally, we expect more growth; after a downturn, we brace for worse. This is recency bias: the tendency to let short-term results shape long-term expectations.
This mindset causes investors to chase trends or flee at the first sign of trouble. But history shows that markets are cyclical and that patience pays off.
Author Morgan Housel, in The Psychology of Money writes:
“The most important part of every plan is to plan on the plan not going according to plan.”
Long-term investors accept that volatility isn’t a signal to panic; it’s part of the journey.
Reflection Question:
How much of your confidence (or anxiety) about investing comes from what’s happened lately rather than what’s true over time?
Call our office to discuss how consistent, long-term strategies can help you stay steady no matter what the headlines say.