Behavioral Finance

Recency Bias in Investing: Why Chasing Recent Winners Often Backfires

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The performance-chasing cycle in five steps, from strong returns and headlines to peak excitement, when many investors buy, and fading momentum

There’s a moment many investors recognize. A sector is surging. A fund is outperforming. An investment seems to be winning everywhere you look. The urge to invest feels obvious. It feels less like speculation and more like catching up. That’s often recency bias in investing, and it can become one of the most expensive behavioral … Read more

Loss Aversion Investing: Why Market Downturns Feel Worse Than They Are

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S&P 500 market downturns since 1980: an average intra-year decline of 14.2%, yet positive calendar-year returns in 35 of 46 years

A market drops 3% in a week and it feels like the beginning of something bad. A market climbs 3% in a week and it barely registers. That imbalance isn’t a coincidence, and it isn’t a personal flaw. It’s called loss aversion: the tendency to feel losses far more sharply than gains of the same … Read more