What I didn’t learn from my engineering degree…

What I didn’t learn from my engineering degree…

Graduating from engineering, I saw the world in black and white, believing people will always act logically.

But experience taught me that our emotions often trump reason…I remember once watching a movie about an airplane disaster before flying overseas the next day (I know, I should know better 😊).

During the flight, I jumped at every engine noise and got so scared. Despite the minuscule risk of an actual crash, the memory of the movie was still too fresh for me.

We often face a similar situation in investing, overreacting to market fluctuations—a behaviour known as Recency Bias. It’s a quirk of our psychology, placing more emphasis on the latest events.

During the COVID-19 share markets crash, fear drove many to exit, missing out on the subsequent recovery. Now, with the markets buoyant, that same bias has flipped, attracting people back in, often too eagerly.

Understanding Recency Bias is crucial. By becoming aware of it, we can resist the knee-jerk reactions to market shifts and maintain focus on long-term goals.

So before you let recent events sway your investment decisions, pause and remember: what matters is the big picture and your long-term goals.