Approximately sixty yrs later, lots of consider Decca should’ve recognized The Beatles’ talent quickly and predicted their long run achievements. This is what is known as “hindsight bias”—also recognised as the “I-knew-it-all-alongside phenomenon”2—a tendency to consider we knew a little something was heading to come about or that we in fact predicted it.
Hindsight bias exists prominently in investing.3 No make a difference the market disorders, there are usually messages from the media or the investing community that a market party, this sort of as an severe fall or increase, was foreseen, perhaps even clear. If you start to consider you have missed possibilities or you’re at hazard for losses, you may attempt to overcorrect by attempting to time the markets or weighting your portfolio also closely in one location.
Though we simply cannot eradicate hindsight bias, we can shift our imagining from “I knew it” to