By SIMON CONSTABLE
When you buy a mutual fund based on its recent performance, you could be succumbing to the "recency effect."
It's a "cognitive defect" from which most people suffer, says Josh Brown, chief executive of New York-based Ritholtz Wealth Management. "People extrapolate what just happened into more of the same." Or put another way, if stocks have consistently risen year after year, people expect they will continue to do so indefinitely.That's the tendency when making a decision to give recent events more weight than things further in the past. See original story here.
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