Recency Bias | Exclusive Client Content

Jonathan Satovsky
CFP®, ChFC®, CIMA®, CPWA®, CDFA®, DACFP

Good morning, good afternoon, good evening. This is Jonathan Satovsky of Satovsky Asset Management and on today’s episode of “Seeking Wisdom, Wealth, and Wellness,” I want to talk about a concept called recency bias. You know it’s common fodder for people to talk about politics, sex, religion, markets, you know, it’s to raise people’s emotional comfort, or discomfort, with the current situation that they’re in, and or, try to evoke discomfort to the other party about what’s happening at a moment in time.

Let me give you an example, specifically. At this moment in time, there’s a particular investment that is doing quite well. I’m gonna share screens with you without divulging too much information, just to highlight a concept. Here’s an investment that year-to-date is actually positive at a point in time where the markets are down sharply. You know, outperforming the markets considerably. And of course, you can also see that money flows are massively positive. Why? Well, because this is doing well and this isn’t doing well, so let’s pile in.

What’s interesting is this, in turn, is a top quartile manager in the world, and now if you look back at the previous year they were the bottom quartile, and the bottom quartile, and the bottom quartile, and the top quartile, and the bottom quartile in the second quartile. And you could see that money flows generally, not, you don’t see in large magnitudes, but money flows generally move in the opposite direction of where things are working at a moment in time.

Now, if you sat still for a decade, you would have done quite nicely with a nine percent return. Although the index earned almost 12 percent a year, but you know, nonetheless, most investors don’t achieve either the investment return of the market or the investment return of their investments. And again, this is a reminder that the only thing that you can control is your behavior.

Create a structure and a philosophy that works and stick through it through thick and thin. Understand it well enough to be able to stick to it and defend it, principally, regardless of what anyone says during periods of time that you’re out of sync, you’re losing money or other people are doing great and you’re not. Just stick on your path and be okay and that will help you on your path to Wisdom, Wealth, and Wellness—even if it doesn’t feel like it in every moment in time.

Have a great day.

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Video Recorded June 23, 2022
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Disclosures

This blog post is not intended to be, nor should it be construed or used as, an offer to sell, or a solicitation or offer to buy any securities or interests in any strategy offered by Satovsky Asset Management, LLC (“SAM”). SAM is a registered investment advisor with the Securities and Exchange Commission – for more information see www.adviserinfo.sec.gov. Please remember that different types of investments involve varying degrees of risk, and that past performance is not indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the strategies recommended or undertaken by SAM) will be profitable. Market index information shown herein is included to show relative market performance for the periods indicated and not as standards of comparison. The market volatility, liquidity and other characteristics of SAM’s portfolio composition are materially different from the securities listed on public market indices. Market index information was compiled from sources that SAM believes to be reliable. No representation of guarantee is made hereby with respect of the accuracy or completeness or such data. Opinions are as of date of video and are subject to change. A copy of SAM’s current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request. SAM undertakes no duty to update information presented herein.

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