A Broken Record

The more I study my industry, the more I’m noticing that the news of pessimism, fear, and greed, are always in cycle and at play. The more I identify these strategies and share them, I know I must sound like a broken record. The sensational opinion laded broadcasts are starting to actually become a daily dose of comedic relief for me. The amusing techniques and the different strategies they used to try to keep people in the throes of a mindset of fear are detectable to the astute observer. Have you heard of Recency Bias?

Recency bias seems to be the latest en vogue marketing technique to keep people in a transactional induced mindset, hoping to avoid loss and financial investing mistakes. Recency bias is a term used to describe the market experiencing a rapid short-term upward or downward motion. This short-term track record could be used to create transactions in investors’ accounts, when in fact in most cases it is better to just stay to the course. Prudent investing would dictate that past performance, especially recent past performance, has nothing to do with how stocks will perform in the future. Research clearly shows that markets are random in the short-term and upward moving over the long run.

Fortunately, and very interestingly, once investors are made aware of the very existence of the phenomenon of recency bias, they are better equipped to resist its lure. A global broad-base, highly diversified portfolio, tempered by short term bonds according to the amount of risk acceptable, is the remedy for speculation and gambling. Keep in mind that Optimism, Pessimism, Fear, and Greed, are not your friends. Manage them over the long run, and one would have a much greater probability of reaping the rewards of the stock markets.

About Paul Nichols

Paul is the founder of Financial Abundance, a Registered Investor Advisory firm and EDI, an Estate Planning Firm with offices in State College and Lewisburg. He has been working with individuals, families and businesses for over twenty years, including many Fortune 500 companies. He has educated tens of thousands of people through seminars, workshops and various international speaking engagements where he shared the stage with many notable individuals such as Ronald Reagan, Robert Kiyosaki (author of Rich Dad, Poor Dad), Mike Ditka, General Schwarzkopf, and Newt Gingrich to name a few.

In 2000, after many years of traveling to consult companies and individuals, Paul decided to relocate from Colorado to State College, PA (his wife’s hometown) to develop a local advisory firm.

Paul operates under the core belief that education plus understanding leads to clarity and confidence; resulting in peace of mind. He is a proud father of three and devoted husband of 20 plus years.

Some of Paul’s accomplishments:
Regular contributor to the Centre Daily Times, via the “It’s Your Money” blog
Featured in the movie Navigating the Fog of Investing
Regular contributor to Town & Gown as the publications Investor Coach
Host of the weekly iTunes Podcast, It’s Your Money
Member of the Western PA Better Business Bureau
Member of the Centre County Chamber of Business and Industry