
Hindsight bias, remembering facts as if we knew them in advance. It's what causes us to make big investment mistakes. People like to believe that they saw the last six months' fantastic rally coming, and yet interestingly, their behavior suggests that they didn't. Consequently, they believe that their insights looking forward are valid when in reality they're not. I call this a self-induced bear trap. As social animals, we squirm when not following our herd. The herd right now is chasing a late-stage bull rally. Some are even questioning having anything but a hundred percent equities in their portfolio. This is not a call to action. If you have an appropriate asset allocation then you're currently enjoying nice returns, while positioned to weather the inevitable storm. Hold the line. Resist your reptile brain's instinct to follow the herd over a financial cliff like a lemming. Try this experiment. Close your...
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