Beware of 'recency bias' with EM concerns - Morningstar

‘Important to have an anchor’

Victoria McKeever
clock • 1 min read

Advisers and investors should beware of 'recency bias' in reacting to headlines about Turkey's currency crisis and its impact on emerging markets, Morningstar's Dan Kemp has said.

"From a behavioural perspective, a ‘recency' or ‘vividness bias' is dangerous for advisers and investors," said the Morningstar Investment Management chief investment officer. This, Kemp explained, was the tendency to react with financial headlines and forget investment fundamentals. "You immediately forget what's good about emerging markets," he said. "You focus on the risk and try to trade through it." "In these situations it's important to have an anchor and for us that's valuations." Morningstar's portfolios had been overweight in emerging markets for the past three years bu...

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