How the Availability Bias Can Derail Investing Outcomes
Don't let easy-to-recall information sway your clients' long-term plans.
This is the 11th article in the Behavioral Finance and Macroeconomics series exploring the effect behavior has on markets and the economy as a whole and how advisors who understand this relationship can work more effectively with their clients.
The availability bias is an information processing bias. It's a rule of thumb or mental shortcut that causes people to estimate the probability of an outcome based on how prevalent or familiar that outcome appears in their lives. People exhibiting this bias perceive easily recalled possibilities as being more likely than prospects that are harder to imagine or difficult to comprehend.