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Felt a little uneasy with the market wobbles over the last while? Maybe some quiet anguish watching your numbers dip into the red? If so, welcome back to an old friend, recency bias, because that’s almost certainly what you’re experiencing.
Step back and look at your portfolio over the last 12, 24, 36 months and you’re on a solid upward trajectory. That’s genuinely good news. But you’re not thinking about that, are you? Your mind is stuck on whatever percent you lost last month. It’s not logical, but that’s how we slightly too clever apes are wired.
So what actually is recency bias? Simple. It’s the tendency to overweight recent events when making judgements. Sound familiar?
Here’s a useful way to think about it. Your brain is software. Impressive software, admittedly, but old. We’re talking about code that was largely written on the African savanna somewhere between 50,000 and 200,000 years ago, optimised for a world of immediate physical threats and fast moving predators with pointy teeth. It hasn’t had a meaningful update since. What you’re experiencing right now, that low level dread, that urge to “do something”, is a legacy feature running exactly as intended. It’s just running in completely the wrong environment.
The specific bug is this: the system is designed to weight recent events heavily. If something bad happened near the watering hole yesterday, assume it might happen again today. Don’t go back to the watering hole. This was, in its original context, genuinely excellent advice. The problem is that “bad thing happened recently” now triggers the same subroutine whether you’re being stalked by a slightly peckish lion or watching a portfolio dip three percent in a volatile March.
And it gets sneakier. The software doesn’t just amplify the recent past. It extrapolates it forward. A bad week becomes a bad year in your head. A volatile month starts to feel like the new normal. There’s no popup warning you that this is happening. No error message. Just a quiet, confident, completely wrong projection running in the background while you contemplate what’s happening.
The patch, unfortunately, can’t be downloaded. But there is a work around. Zoom out. Literally, open your portfolio app, switch the chart to the maximum time range, and just look at it. You’re essentially forcing your buggy software to load a larger dataset than it instinctively wants to process. History is not a perfect guide to the future, but it is a reliable antidote to the present. Markets have survived worse than whatever is currently filling the headlines. They will probably survive this too.
The other thing worth remembering? Everyone else is running the same buggy software you are. The market is the output of millions of people experiencing the same glitch in real-time. Which means the moment of maximum collective dread, the point where it genuinely feels like something has permanently broken, is historically quite a good time to be invested, not a good time to be heading for the exit.
You’re not broken for feeling this way. You’re just running slightly old fashioned code in a world it wasn’t designed for. The trick isn’t to fix the software. It’s to know when not to trust it.
I agree that recency bias is important. The “news” can be equally detrimental to our financial plans. I should restate that and say I think we should be very selective about our information sources. I prefer written ones, but AI “slop” is making it even more difficult to get a grasp on reality.
With all of the negativity, what’s the reality for my accounts? I’m using data as of 4/7/2026.
I would hope that HD readers are “long term” investors. By that I mean investing with the intention to hold for 10-15 years.
I do use a long-term approach and it has worked for me. Of course, there are short-term ups, and downs. For example, I own a TIPS fund and even with dividends the current value shows a “loss” of 2.96%. But that fund is only 1.92% of my portfolio ( I prefer to hold bonds). The real decline to the portfolio is 0.058%. That miniscule amount is hardly worth thinking about.
I think it is useful to define investment gyrations as declines or increases. After all, there is no loss incurred (or gain) until one sells and cashes out.
Anything purchased recently may show a short-term decline in value. If we think long-term, it is reasonable to assume there will be an increase in the future. Certain, more volatile stocks or investments may not behave with the overall stock market. That’s the nature of speculation.
My point is, even a 50/50 portfolio can do very well, long term. Mine has. However, I’m retired and so I am prudently more conservative and practice wealth defense. This would not be my approach if I were more than 10 years from retirement.
My portfolio currently shows an increase in value of 0.4% since 12/31/2025. It shows an increase of 10.25% since 12/31/2024. The increase would be greater if I didn’t take RMDs, and if I hadn’t withdrawn 10% in 2023. The S&P 500 shows a recent decline of about 2.6%.
Certain investments have been helpful to me. My Gold and Precious Metals fund shows a recent decline in value, although it is up about 130%. A utility I purchased in 2014 is up 400%. My energy ETF is up about 250%. There are 15 holdings which have more than doubled in value.
Even the S&P 500 shows a 5-year gain of 62%, excluding dividends.
If, after analyzing your portfolio you find it to be too volatile or subject to larger declines recently, let’s say greater than 10%, then perhaps you should re-evaluate your approach. However, if you are young, you may have decades of investing ahead
If the market perturbation is disturbing, take a look at your net worth. With recent real estate value increases many of us have seen an increase in our net worth, even if we fully depreciate automobiles, etc. In my case, because I have not spent all of my annual RMDs, the remainder goes into savings. That too has improved my net worth.
Unbiased information is, in my experience, becoming increasingly hard to find. I try to sort the wheat from the chaff — though I’m self-aware enough to know I probably introduce my own bias in the process.
You are reminding me of a John Bogle saying, “Don’t just do something, stand there!” His play on what you are describing in those who may panic and many times make the wrong move.
There’s no shortage of wisdom in a Bogle quote.
What a wise and funny article, Mark. You’ve got me chuckling at 6:30 AM, which runs very much counter to how my own brain is wired.
I use my own “zoom out” strategy for moments like this. Every year for the last 30, I have issued myself an annual report – on New Year’s Day I print out the one page summary of my assets and holdings, and throw it in a file folder.
And when I’m awake at 3 AM, feeling stressed or insecure, I open the folder and pick a report from five or 10 or 15 years ago. It’s the fastest tranquilizer imaginable.
Glad I could raise a smile — it’s something I actively aim for. Life’s already well-stocked with doom and gloom; the last thing it needs is me topping it up.
Great piece. Your following statement really hit home for me:
“Which means the moment of maximum collective dread, the point where it genuinely feels like something has permanently broken, is historically quite a good time to be invested, not a good time to be heading for the exit.”
It took me decades to finally grasp this concept and now, at 75, I’ve gotten comfortable with NOT panicking and selling when things go south. Maybe advancing age and the idea we’ve amassed a modest nest egg to carry us through to the end is the predominant factor here. Thanks for another thoughtful article.
I had — or rather, have — a different problem entirely. I’m far too laid-back when it comes to my portfolio. Just logging into my account requires a major act of willpower, let alone actually managing the thing. Without a written rebalancing policy holding me accountable, I suspect it would happen roughly… never.
The Zoom-Out suggestion is golden. I occasionally look at what has happened to my accounts since I retired, and then some dates that are relevant to me, but no one else. Examples include when my divorce became final and when I started my last job. In all cases, I’ve benefitted from the set-it-and-forget-it approach to investing. It’s really not unlike Kathy’s “benign neglect”, but I look at everything more frequently than she does.
I did something similar recently. I’ve been retired for a year now, so I reviewed how my portfolio had performed over that time — and it was a great feeling to see how much it had grown in my first year of retirement.
This is where benign neglect works well. I look at my portfolio at most once a month, when I may need to transfer cash, and I only take action if my asset allocation is off by 4-5%, and not always then.
Personally, I think your “benign neglect” phrase deserves a place in every market psychology 101 textbook ever written. Two words. The whole thing, distilled.
Thanks. I also call it productive procrastination, although I suppose some might call it laziness. It helps to be busy doing something else – during the 2008 meltdown I was either planning trips or actually traveling.
During times like this, I think the gaps between stated intentions and actual behaviour are interesting.
Many will state that they are a long term investor, but then act like a short term trader.
Yes, I call them ‘white knuckle bulls”.
Frankly I don’t care so much about where we have been, but where we are today. An upward or downward trend means something long term perhaps, but what I see in my account balances this after noon matters most.
Lol, that’s funny… your reply is a perfect example of the software glitch operating in the wild. 😜
Dick’s income sources including his pension and dividends from bonds, along with a lifestyle that fits within his budget allow him to sleep well at night. There is no compelling reason to update his software, though Connie may want to occasionally give him a reboot.
For the majority of us without a generous defined benefit plan, especially those retiring at a young age, software updates are essential to our sanity and our not running out of money before support for our operating systems fail.
Nice job explaining what is often a fuzzy concept for investors.
Thanks. This is a great reminder to all of us to sit on our hands and not do anything foolish in the face of a declining market.
I worked in the investment biz and when markets started to fall, we would inevitably get phone calls from clients, asking what we were going to do. The answer was in most cases was “nothing,” or “very little,” neither of which was much appreciated by our clients as they truly believed that we could somehow avoid losses in their accounts. The worst calls were from panicked clients who insisted that we sell all of their holdings – inevitably at the bottom of the market.
Now that I am retired and the shoe is on the other foot, I can better empathize with my former clients as the fear of losing it all is a powerful force, especially as we age. Rather than do nothing, I have raised more cash to meet several years of RMD payouts and have added more to my non-US holdings, but have otherwise remained fully invested using a balanced portfolio strategy. Beyond this, I continue to remind myself almost daily to not panic and do something foolish that I will only live to regret.
Very wise, fellow Duck!
Telling a client to do nothing might just be the most underrated service a financial adviser offers. Do that two or three times over a client relationship and the fee conversation takes care of itself
Great reminder on how our brains and emotions work and to not forget to zoom out to recognize a longer term reality. I am certainly not immune from those emotional fluctuations as I do monitor the markets on a daily basis.
But in addition to emotions, the real danger is inappropriate reaction in our investments due to these short term ups and downs (whether positive or negative).
For me, implementing a long term plan and staying the course, has been the best mode of operating. And with the use of simple, highly diversified, low cost funds, that decision is made more easy as I just float on top and go up and down (and hopefully mostly up in the long term).
Doug, floating on a lilo, cocktail in hand, while your portfolio bobs away beneath you — that’s honestly the perfect antidote to market stress. Or at least, that’s how my overactive imagination has chosen to picture you!
I love the water so that sounds like a great place to be. Probably sipping a margarita or a hazy New England IPA.
Right now I’m in the backyard enjoying springtime cleanup and listening to Joe Bonamassa, but just sipping water at the moment.