Let’s be clear: We did not wish for, nor in any way cause a tumble in the markets, especially among tech stocks. That said, we could not have come up with a more telling illustration to underscore the perennial value of building – and maintaining – a globally diversified investment portfolio for achieving your greatest financial goals.
The average American spends more than $10,000 per person annually on healthcare expenses, including premiums, deductibles and coinsurance amounts. For a large family, that amount can quickly become unsustainable. In the past, it was common for employers to absorb the majority of these costs, leaving the employee responsible for only a small portion.
Combining an enduring investment philosophy with a simple formula that helps maintain investment discipline can increase the odds of having a positive financial experience.
“The important thing about an investment philosophy is that you have one you can stick with.”
David Booth, Founder and Executive Chairman
We’ll wrap our series, the ABCs of Behavioral Biases, by repeating our initial premise: Your own behavioral biases are often the greatest threat to your financial well-being.
We’re coming in for a landing on our alphabetic run-down of behavioral biases. Today, we’ll present the final line-up: sunk cost fallacy and tracking error regret.
Sunk Cost Fallacy
So many financial behavioral biases, so little time! Today, let’s take a few minutes to cover our next batch of biases: overconfidence, pattern recognition and recency.
There are so many investment-impacting behavioral biases, we could probably identify at least one for nearly every letter in the alphabet. Today, we’ll continue with the most significant ones by looking at: hindsight, loss aversion, mental accounting and outcome bias.