ER Doc Advisor - Financial Planning & Taxes for Emergency Physicians

EP 178: Should My Portfolio Be Up More?

Recency bias: a cognitive bias that favors recent events over historic ones; a memory bias. I mention this because a composition of the 500 largest companies in the US, also known as the S&P 500, has recently hit all-time highs. While of course that’s a good thing, recency bias is running rampant, making it difficult to remember times when the S&P 500 has severely lagged behind other markets. And when this causes investors to abandon the science of investing and instead opt to own just a single asset class, problems can arise.

On today’s episode, we’ll discuss how periods of return, especially recent ones, can paint a very different picture than what has unfolded over longer time frames and how the infatuation with the best performers can taint the way we look at our own portfolios.

Topics Discussed:   

  • What recency bias is and how it can be dangerous for investors.
  • The importance of periods of return and how they help paint a bigger picture.
  • What investments tend to be consistently rewarded.
  • The importance of diversification and how you (generally) want your portfolio set up.
  • Why the S&P 500 works and how it relates to diversification.

Resources Mentioned:

Tags

portfolio, investing, investments, recency bias, cognitive bias, diversification, investment strategy, ER docs, emergency doctors

by 
Scott Wisniewski, EA