Recency Bias - And Foreign Stocks

In which past performance is no guarantee of future results

Just a quick note as we head into the weekend.

I got to thinking about the concept of recency bias this past week. Recency bias been defined as “the unfounded conviction that recent trends will continue into the near-term future.”

Specifically, I pondered the concept in relation to our target allocation between U.S. and foreign stocks. It is true that, of late, U.S. stocks have significantly outperformed their foreign counterparts. Does that mean, however, that you should get careless with your allocation, or possibly even focus on “hot” U.S. stocks to the exclusion of other asset classes?

Over the past month or so, I have contributed several articles on TheStreet.com. In this case, however, I thought it was about time to produce a little something for my own website.

So, here’s the article. If the topic proves to be of interest, have a look. I offer my view, of course. But I also support it with the choices of a major investment house. You might find something there of interest for yourself. And you might also wish to forward it to the individual at the party you went to last weekend who was bragging about his (or her) “stonks.”

Remember, as Peter L. Bernstein has said:

Many aspects of investing are fun, but your future wealth isn’t a game. You should manage it in the most cold-blooded fashion.

I don’t think I can leave you with any sager words as we head into the weekend. So I won’t even try.

My sincerest thanks to you new readers who joined this past week. Welcome!

Have a great weekend, everyone.