In this episode, Trevor Lawson delves into recency bias, a cognitive bias where individuals overemphasize recent experiences, even if they aren't the most relevant. He provides relatable examples, such as the perception of current mortgage rates as astronomically high due to recent historical lows , and the tendency to invest heavily in sectors that have recently performed well, like the large-cap sector. Trevor stresses the financial pitfalls of chasing hot investment trends and offers strategies to combat recency bias: implementing a long-term investment strategy , diversifying portfolios , regularly rebalancing investments (especially in 401ks) , and reviewing historical market data. The goal is to empower investors to recognize and counteract these biases for better financial decisions.

Reference: https://www.schwabassetmanagement.com/content/recency-bias

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