WEEKLY ROUNDUP

This Bias Could Be Affecting Your Portfolio

Hello, Reader.

Imagine watching NBA basketball, and LeBron James is having a terrific game.

He’s just made six shots in a row. The game is close. And James is lining up to take another jump shot.

What are the odds that he is going to make it?

In basketball, players and coaches will often talk about the “hot hand.” This refers to the phenomenon that someone who has made several baskets in a row has a greater chance of making the next one.

But that’s a fallacy. The odds that James will make his next shot remains the same, regardless of how many baskets he has made previously.

The belief in the “hot hand” is a well-studied example of “recency bias.”

If you’re unfamiliar with this term, you will certainly understand it if you’ve ever had an annual performance review at your job. Odds are that your supervisor remembers a lot of what you’ve done in the last month… but can’t remember work completed nine months ago. As a result, you’re more likely to be judged more for the last month rather than the last year.

This same bias could be affecting your portfolio, too.

In investing, “recency bias” occurs when a stock has momentum, either up or down. If a stock has been going up for the last six months, folks naturally believe it is likely to keep going up.

The inverse also happens: If a stock hasn’t gone up in six months, it seems likely it will not go up any time soon.

On a wider level, if it has been 10 years since the last bear market, investors are more likely to believe one is not coming soon.

However, you don’t need to rely on momentum to know which stocks to buy or sell. And you don’t have to let your future be governed by recency bias. All you need is the right tools.

That is why my InvestorPlace colleague Louis Navellier revealed his powerful quantitative tool at his “Day-After Summit” last week.

The trades that the system has flagged have beaten the S&P 500 by 6-to-1 in back-tests going back to 1990. And of the 19 open trades in the core portfolio where this system is now in use, 18 are winners.

Folks who take advantage of this system will have the chance to get ahead of unpredictable market moves during political, economic, and financial shocks… like tomorrow’s presidential election is expected to bring. It will also give you the shot at rare short-term gains.

To learn more about this tool – and what to expect in the days after tomorrow’s election – click here.

Now, let’s look at what we covered here at Smart Money this past week…