{"id":13990,"date":"2016-08-15T23:24:12","date_gmt":"2016-08-16T03:24:12","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=13990"},"modified":"2016-08-15T23:24:12","modified_gmt":"2016-08-16T03:24:12","slug":"beware-of-recency-bias","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2016\/08\/15\/beware-of-recency-bias\/","title":{"rendered":"Beware of recency bias"},"content":{"rendered":"<p>Every the year the <a href=\"http:\/\/search.asx.com.au\/search\/click.cgi?rank=2&amp;collection=asx-meta&amp;url=http%3A%2F%2Fwww.asx.com.au%2Fdocuments%2Fresearch%2Frussell-asx-long-term-investing-report-2016.pdf&amp;index_url=http%3A%2F%2Fwww.asx.com.au%2Fdocuments%2Fresearch%2Frussell-asx-long-term-investing-report-2016.pdf&amp;auth=JckTrZ2WUkpWXmqBi11IdQ&amp;query=Long-Term%20Investing%20Report%202016&amp;profile=web\" target=\"_blank\">2016 Russell Investments\/ASX Long-term Investing Report<\/a> provides an invaluable summary of before and after-tax returns on various asset classes for Australian investors, over 10 and 20 years.<\/p>\n<p>Naive investors are likely to automatically pursue the asset classes that offer the highest yields. Recent performance is more likely to attract our attention than more stable longer-term performance. Josh Brown <a href=\"https:\/\/goldstocksforex.com\/2015\/11\/30\/the-trouble-with-chasing-hot-strategies-josh-brown\/\">highlighted last year<\/a> that mutual funds that attracted the most new investment tended to underperform funds that attracted the least new inflows. I suspect that the same applies to asset classes.<\/p>\n<p>If we consider each of the asset classes highlighted, it is clear that performance over the next 10 years is likely to be substantially different from the last decade.<\/p>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter\" title=\"Australian Asset Classes 10-year Performance to 31 December 2015\" alt=\"Australian Asset Classes 10-year Performance to 31 December 2015\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2016\/russell-10year.png?w=525&#038;ssl=1\" \/><\/p>\n<p style=\"text-align:right;font-size:.9em;color:#999999;\">Source: 2016 Russell Investments\/ASX Long-term Investing Report<\/p>\n<h2>Australian Shares<\/h2>\n<p>Australian Shares endured a (hopefully) once-in-a-lifetime financial crisis in 2008. 10-Year performance is going to look a lot different in two years time (20-years is 8.7% p.a.). Prices of Defensive stocks, on the other hand, have since been inflated by record low interest rates.<\/p>\n<h2>Residential Property<\/h2>\n<p>Residential property prices boomed on the back of low interest rates and an influx of offshore investors. But growth is now slowing.<\/p>\n<p><img data-recalc-dims=\"1\" decoding=\"async\" class=\"aligncenter\" title=\"RBA: Australian Housing Growth\" alt=\"RBA: Australian Housing Growth\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2016\/2016-08-05-housing.png?w=525&#038;ssl=1\" \/><\/p>\n<h2>Listed Property<\/h2>\n<p>REITS were smashed in 2008 (20-years is 7.7% p.a.). But before contrarians leap into this sector they should consider the impact of low interest rates, with many trading at substantial premiums to net asset value.<\/p>\n<h2>Bonds &amp; Cash<\/h2>\n<p>Low interest rates again are likely to impact future returns.<\/p>\n<h2>Global Shares<\/h2>\n<p>Global Shares also weathered the 2008 financial crisis (20-year performance (unhedged) is 6.4% p.a.). Subsequent low interest rates had the <a href=\"https:\/\/goldstocksforex.com\/2016\/08\/15\/defensive-pe-at-a-dangerous-high\/\">greatest impact on Defensives<\/a>, while Growth &amp; Cyclicals trade at more conservative PEs.<\/p>\n<p>I won&#8217;t go through the rest of the classes, but there doesn&#8217;t seem to be many attractive alternatives. It may be a case of settling for the cleanest dirty shirt, and the least smelly pair of socks, in the laundry basket.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Every the year the 2016 Russell Investments\/ASX Long-term Investing Report provides an invaluable summary of before and after-tax returns on various asset classes for Australian investors, over 10 and 20 years. Naive investors are likely to automatically pursue the asset classes that offer the highest yields. Recent performance is more likely to attract our attention &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2016\/08\/15\/beware-of-recency-bias\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Beware of recency bias&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[40,16,57],"tags":[239,247,290,3005],"class_list":["post-13990","post","type-post","status-publish","format-standard","hentry","category-australia-nz-countries-regions","category-investment-strategy-2","category-stock-markets","tag-asset-classes","tag-asx","tag-australia","tag-russell-investments"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Beware of recency bias - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Beware of recency bias - the patient investor\" \/>\n<meta property=\"og:description\" content=\"Every the year the 2016 Russell Investments\/ASX Long-term Investing Report provides an invaluable summary of before and after-tax returns on various asset classes for Australian investors, over 10 and 20 years. Naive investors are likely to automatically pursue the asset classes that offer the highest yields. 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I have added my comments in italics. Investing during times of market stress and volatility can be difficult. For this reason it\u2019s useful\u2026","rel":"","context":"In &quot;Earnings &amp; Dividends&quot;","block_context":{"text":"Earnings &amp; Dividends","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/earnings-dividends\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/04\/golden-rules-596x328.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/04\/golden-rules-596x328.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/thepatientinvestor.com\/wp-content\/uploads\/2016\/04\/golden-rules-596x328.jpg?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":10397,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/07\/26\/diversification-the-only-free-lunch-in-investing\/","url_meta":{"origin":13990,"position":1},"title":"Diversification &#8211; the only &#8216;free lunch&#8217; in investing","author":"ColinTwiggs","date":"July 26, 2014","format":false,"excerpt":"Diversification is often referred to as \"the only free lunch in investing\" because it affords investors the opportunity to reduce investment risk without reducing returns. Most investments involve a trade-off between risk and return, with higher returns requiring investors to expose themselves to greater risk. But effective diversification allows investors\u2026","rel":"","context":"In &quot;Investment Strategy&quot;","block_context":{"text":"Investment Strategy","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/investment-strategy-2\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13853,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/07\/26\/diversification-the-only-free-lunch-in-investing-2\/","url_meta":{"origin":13990,"position":2},"title":"Diversification &#8211; the only &#8216;free lunch&#8217; in investing","author":"ColinTwiggs","date":"July 26, 2014","format":false,"excerpt":"Diversification is often referred to as \"the only free lunch in investing\" because it affords investors the opportunity to reduce investment risk without reducing returns. Most investments involve a trade-off between risk and return, with higher returns requiring investors to expose themselves to greater risk. But effective diversification allows investors\u2026","rel":"","context":"In &quot;Momentum Investing&quot;","block_context":{"text":"Momentum Investing","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/momentum-investing-2\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":10271,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/07\/11\/growth-or-income\/","url_meta":{"origin":13990,"position":3},"title":"Growth or income?","author":"ColinTwiggs","date":"July 11, 2014","format":false,"excerpt":"Most investors face a decision as to how much of their portfolio to allocate to growth investments and how much to income investments. The mind-set of many income investors is that they cannot afford the volatility of growth investments. The following example illustrates how income investors can use growth investments\u2026","rel":"","context":"In &quot;Financial Planning&quot;","block_context":{"text":"Financial Planning","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/other\/financial-planning\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13851,"url":"https:\/\/thepatientinvestor.com\/index.php\/2014\/07\/12\/growth-or-income-2\/","url_meta":{"origin":13990,"position":4},"title":"Growth or Income?","author":"ColinTwiggs","date":"July 12, 2014","format":false,"excerpt":"Most investors face a decision as to how much of their portfolio to allocate to growth investments and how much to income investments. The mind-set of many income investors is that they cannot afford the volatility of growth investments. The following example illustrates how income investors can use growth investments\u2026","rel":"","context":"In &quot;Momentum Investing&quot;","block_context":{"text":"Momentum Investing","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/investing\/momentum-investing-2\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":26048,"url":"https:\/\/thepatientinvestor.com\/index.php\/2021\/05\/29\/the-outlook-for-key-sectors-and-asset-classes\/","url_meta":{"origin":13990,"position":5},"title":"Outlook for key sectors and asset classes","author":"Colin Twiggs","date":"May 29, 2021","format":false,"excerpt":"Exchange-traded funds (ETFs) are a useful tool for analyzing growth in competing sectors. We generally use the largest one or two ETFs by market capitalization in each sector. First, let's start with Growth\/Value and large Caps\/Small Caps and analyze how they have been impacted by recent interest rate and inflation\u2026","rel":"","context":"In &quot;Copper&quot;","block_context":{"text":"Copper","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/gold-commodities\/commodities-gold-commodities\/copper\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/13990","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=13990"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/13990\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=13990"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=13990"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=13990"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}