Known Unknowns. Bond vs Stock Performance, which will do better in the next 12 months?
As investors one of the things, we need to be ever mindful of is our own biases. If left unchecked, biases can cause all kinds of havoc for our investment programs. A common cognitive bias is ‘recency bias’. This is when we let ourselves draw conclusions about the future that are heavily influenced by our recent lived experience – rather than a more objective, broader historical context.
Right now, many investors are feeling the recent scares of an investment climate that has seen virtually all the major asset classes decline simultaneously. And to make matters worse, our defensive assets – such as bonds – have fared just as badly (or worse) than our riskier investments (such as shares and property). In this context, many investors are particularly ‘gun-shy’ about bonds. In this video, our own Steve Garth provides some useful ‘reality checks’ around the likely flight path of bonds and equities in the year ahead.