An Investor’s Guide to Availability Bias

Next Steps

Download Six Barriers to Investment Success: Uncovering Your Behavioral Biases

Download​

Other Investor Behavior Videos

Access more short videos to see how behavioral biases show up in our everyday lives.

Watch Now

WHAT IS AVAILABILITY BIAS?

Availability bias is the tendency investors have to be strongly influenced by what is personally most relevant, recent or traumatic.

THE LASTING IMPACT OF A DOWN MARKET

As investors, Availability Bias can translate into perceptions colored by personal experiences that likely represent only a fraction of the complete economic reality.

For many investors, little was more terrifying than the 2008 financial crisis. The S&P 500 Index was down 37%1. But, the following year, in 2009 the market bounced back to 26.5%.

After 2009 ended, we conducted a survey asking people how they thought the market performed the previous year. Likely due to the traumatic events of the recent crisis, two-thirds of respondents incorrectly thought the market was down or flat in 2009.

The danger of basing investment decisions on market perception, rather than facts, is that investors may pull their money out at the wrong time and miss some of the best days as the market recovers.

A DISCONNECT BETWEEN PERCEPTION AND REALITY

S&P 500 Index annual returns1 and Franklin Templeton
Investor Sentiment Survey Results2

This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results.

WHAT CAN YOU DO ABOUT IT?

One of the best ways to make better financial decisions is to work with a financial advisor. A financial advisor will take the time to understand your individual needs and create an investment strategy that’s tailored to your specific goals, your individual situation and your risk tolerance.

As you navigate the market, an advisor can also help you keep your emotions and biases in check and stay on track with regular portfolio reviews and adjustments.

Next Steps

Every day we are faced with decisions—some are easier to make than others. Learn more about behavioral biases and the impact they can have on investment portfolios.

Download Six Barriers to Investment Success: Uncovering Your Behavioral Biases

Download​

Other Investor Behavior Videos

Access more short videos to see how behavioral biases show up in our everyday lives.

Watch Now