Recently people have noticed that the market is going up, and we have been asked if it is a good idea to go all in and take money out of CDs now and invest it all? Our advice, today on Elevate Wealth.
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FULL TRANSCRIPT:
One of my clients recently noticed that the market is going up and asked if it is a good idea to go all in and take their money out of CDs now and invest it all. In the financial industry, there's a term called "recency bias." Recency bias is a cognitive bias that affects decision-making by giving greater importance and weight to recent events or information. This is when investors place an overemphasis on the most recent financial data, news, or market performance but ignore historical trends. It's tempting to concentrate on short-term market movements and to chase performance or assets or investment strategies that have performed well recently, like Bitcoin or Tesla, assuming such performance will continue indefinitely. But this leads us to overlook broader historical context and the cyclical nature of financial markets. It comes with a risk of overreacting. When markets experience volatility or significant declines in the short-term, people with recency bias can overreact, either by buying or selling. It's on both sides/ I caution against neglecting the long-term historical performance of assets or markets in favor of recent trends. I do not advise making investment decisions based on short-term market fluctuations. Rather, I'd like to consider the long-term fundamentals. Resist the urge to chase assets that have performed well. Remember, the markets are cyclical. Avoid chasing performance. Historically, we have seen that people have a more successful experience over time when they stay invested and have a long-term view. If your adviser isn't talking with you on a regular basis to ensure you have a diversified portfolio, we can help. Just visit elevate-wealth.com and click Let's Talk.
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