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Bias In Action

Mon, 12 Feb 2018 09:06:09 GMT

Myopic Urges The recent sharp correction in markets has clearly surprised a lot of investors. No doubt this is partly due to the standard myopia people seem to exhibit as soon as the last crash is out of sight, but it also seems to be connected to the fact that the seemingly inexorable rise in share prices and the continuing low interest rates on deposits has tempted new people into stocks. Faced, for the first time, with nasty losses they’re casting about for some kind of strategy to deal with the situation. In truth if you need to find a strategy after markets have started falling it’s too late. For most of us the only sensible approach is to only buy things we’re comfortable holding through any kind of downturn and to then do nothing when volatility strikes. But even experienced investors face the urge to do something – anything – in the face of mounting losses. This is action bias, in action.  Surprise ... Corrections – 10% market falls – are not uncommon. The S&P500...