Familiarity Bias in Action
So, who remembers our Familiarity Bias Blog from April 2019? Not the Argentines it would appear. The S&P Merval Index (the index that tracks the Argentine Stock Exchange) just had a historic one-day decline of -48%. Which is the second largest one day decline since the 1950s.
Much like Irish people’s Grá for Irish Property, the Argentines seem to love Latin American Equities. The average Latin American investor has about 97% of their portfolios invested in Latin American equities. This is a perfect example of “Familiarity Bias”.
So why is this a bad thing? Well as our Familiarity Bias Blog explains it can skew our portfolios allocation away from an appropriately globally diversified strategy towards assets that we FEEL are more secure or better value because we think we know more about them.
Closer to home we see this time and time again with Irish investors, some of their favourites include; Irish Property (the closer to your home town the better), CRH Shares, Ryanair Shares and Kerry Group (I mean are you even Irish if you don’t hold Kerry Group Shares?).
At the end of the day, the only way to successfully capture long term market returns is to invest in the overall Global Stock Market and leave your money there for a long period of time.
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