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.