Ever been to a concert where the band came back out for a big encore? I’ll bet you answered “yes.” They practically always do.
During the middle of the concert, perhaps the band stuck with songs from the newest album. Ones that you don’t know nearly as well. Then, at some point, the lead singer pulled out an acoustic guitar, the rest of the band disappeared, and half the crowd got up to purchase another $14 stadium beer or margarita.
But that last song…now that got everyone going!
And that was by design. In designing their set list, the band not only planned for an encore. They planned to play their best song last. That way, their fans would leave the concert talking about how amazing the concert was.
This is Recency Bias in action. It’s yet another human tendency that we have to set aside before we take action in our investment portfolio. (That’s the goal of quantitative stock system like the one I’m deploying in my new Accelerated Income Project, where I’m preparing a new buy alert for tomorrow.)
In studying Recency Bias, researchers often focus on children, who display this tendency very strongly. In a 2018 study at the University of Rochester, developmental psychologists took a group of 24 toddlers and found that, given the choice between two options, the children chose the second option 85.2% of the time. The study was given the memorable title “Cake or Broccoli?”, suggesting that parents could use the technique to “trick” children into eating their vegetables.
But as an adult, you certainly understand Recency Bias if you’ve ever had an annual performance review at your job.
Odds are that your supervisor remembered a lot of what you’ve done in the previously month but couldn’t remember work completed nine months ago. As a result, you were more likely to be judged for the previous month than the previous year.
And this same bias is likely affecting your portfolio, too.
Now, as I’ve mentioned, this is one of a series of articles: Your Accelerated Income Guide at Market360. Each day, we discuss about how I find “accelerated income” stocks like the ones I’ll recommend tomorrow. These stocks display all the signs of a huge future advance…that can provide you the extra income everyone can use … now more than ever.
So many investors have spent years getting lousy market returns and now they need a strategy to catch-up to live the life they’ve always dreamed. That’s why, in today’s essay, I’m detailing Recency Bias, how it works, and how you can avoid it.
Online Gaming Winner
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 to not turn around and go up any time soon.
On a wider level, if it has been 10 years since the last bear market (sound familiar?), investors are more likely to believe one is not coming soon. In February and March, we all learned that wasn’t true!
But my strategies like The Accelerated Income Project use a consistent, proven set of criteria to lead the way. This is how you find the stocks that are about to break out to the upside – regardless of how they have performed recently.
In December 2016, the system that became The Accelerated Income Project found SINA Corporation (SINA) – an online gaming company in China.
2015 and 2016 was a rough time for Chinese stocks in particular, after a big “bubble” popped in that market. But during the third quarter in 2016, SINA reported a 21% increase in total revenues and a 21% jump in advertising revenues. Income from operations surged 147%. Net income per share was $0.56, which topped estimates for $0.34 by 64.7%.
Just two months after I made my recommendation, the stock was up 23%. Just between mid-May and June 2017 the stock soared 41%.
Most analysts don’t even cover this kind of stock, or they recommend one after its big run up. That’s where Recency Bias can cost you money.
However, as we just saw, if you can find the right stock BEFORE that next major event…you can make large gains in a much shorter period of time.
Don’t let your future be governed by Recency Bias. Instead of eyeballing a stock chart and seeing how it has performed lately, my system runs the numbers using thousands and thousands of points of data (fundamental as well as momentum indicators). It finds the very best names and sends me an alert that a stock is about to skyrocket. Because the alert is developed using only data, I don’t have to worry about falling victim to Recency Bias.
Join me now and you won’t have to worry about that, either.
Instead, you can go back to investing in your retirement. And if you’ve already started investing, the gains with The Accelerated Income Project expecting some of the fastest gains in my career – we’re talking about moves of 100%, 200% and even 500% in weeks or months, not years.
That being said, the key is not to get impatient…or greedy. My system isn’t capable of that; it simply looks for the same precursors that have portended every great stock play of my career. Click here to find out more and get my next buy alert.
Note: Tomorrow, I’ll release a brand-new Buy Alert for The Accelerated Income Project. I’ll detail two new buys, a tech manufacturer and a diagnostics company. They may sound very different – but crucially, both have the fundamentals required to keep them firing on all cylinders.
Both companies have been beating expectations and seeing Wall Street analysts revise future expectations higher. This is a reliable signal of a big stock surge – and I don’t want you to miss out.
Between the glimpse at this stock-picking methodology and potential access to its hottest stock picks, you’ll want to see what I’ve shared in my Accelerated Income Project presentation.