Great Expectations

Great Service There’s this old adage in customer service that says, “under-promise and over-deliver.”

Why? Because so much of happiness, or contentment, is derived from outcomes – how things turn out – being better than what one may have expected.

Imagine the opposite; how does it feel when someone overpromises and under-delivers? Frustrating, disappointing, annoying, arghh! And the list goes on.

Just Like Last Time Our expectations are often rooted in our past experiences. As consumers, we appreciate consistency. We want that chicken sandwich to taste just like it did last time, and we anchor these expectations more heavily on our RECENT experiences.

One of the most commonly referenced cognitive biases in behavioral finance is recency bias. This bias is our tendency as investors to lean more heavily on recent outcomes to guide future expectations. BUT past is NOT prologue, and herein lies the exact issue that we will address in today’s discussion: investor’s great [misplaced] expectations around future investment returns.

• http://thoughtsonmoney.com
• http://thebahnsengroup.com