Your Funds: Are your biases messing up your investment decisions? | Business News
I recently bumped into my friend Mike, a pilot and former lacrosse teammate whom I hadn’t seen in years.
After catching up about family and friends, he reminded me that our last conversation had included him asking about where to invest, to which I asked him, “What is your greatest financial fear?”
I had explained that to mitigate his great worries, he needed to understand the different risks and take them all on.
Mike said that he had done as I suggested, and built a diversified portfolio, but that his concerns had changed. Now less than a handful of years from retirement, he loses sleep over longevity risk – the potential to outlive his money – and sequence-of-return risk, the chance that the market will tank around the time he retires. He’s reevaluating his portfolio, sizing up opportunities and deciding what to do next .
In our conversation, I saw the following tendencies or biases, the same kinds of things I see and…
