As I’m sure many of you have heard, Nobel Prize-winning and pioneering psychologist Daniel Kahneman, Ph.D., died in late March 2024. He, along with Amos Tversky, is largely credited with founding and popularizing the field of behavioral economics, which has had a huge influence on diverse fields ranging from psychology to public policy to law to finance.
So, I thought I’d use this space to reflect on three biases that I’ve been thinking a lot about lately that have their roots in the work that Kahneman and his colleagues started. Two of them are classic — confirmation bias and availability bias. One is relatively new — let’s call it the “additive bias” — and has its grounding in the field that Kahneman helped found.
In all three cases, I love thinking about how the central insights apply to modern-day interactions between advisers and clients and how we might improve our lives (and the lives of our clients) if we attend to them more deeply.
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Can investors realistically time the market to maximize returns, especially over the long term? According to a recent study from Charles Schwab, perfect market timing is impossible. The firm’s research showed that most investors are better off investing as soon as possible using a buy-and-hold strategy rather than trying to predict short-term peaks and valleys.
To produce their new study, researchers at the Schwab Center for Financial Research analyzed the hypothetical 20-year returns of five investing strategies using historical S&P 500 data. Each hypothetical investor received $2,000 every year, which they could invest however they like.
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This report features world capital market performance and a timeline of events for the past quarter. It features a global overview and the returns of stock and bond asset classes in the US and international markets. The report also illustrates the impact of globally diversified portfolios.
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