You’re probably familiar with the rush of relief you feel when you manage to narrowly avoid a disaster. Maybe you hit the brakes just in time to avoid a car accident. Or you catch that antique vase you bumped into just in time to keep it from smashing into a thousand pieces. Life is full of near misses. They happen in the investing world too—and when they do, investors sometimes react in surprising ways. Read on to learn why it’s important to keep things in perspective after a near miss—and how financial advice can help.
Content inspired by the insights of Vanguard Senior Behavioral Scientist Annie Wilson, PhD. Annie received a PhD in consumer behavior from Harvard Business School and now works with Vanguard’s Center for Analytics and Insight.1
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1 According to Vanguard’s research How America Invests 2020, advised households have a tighter range of equity holdings, exhibiting less extreme allocations and, therefore, a more disciplined approach to investing. This observation is a result of Vanguard making portfolio allocation decisions as the advisor.
Robin Dillon-Merrill, Catherine H. Tinsley, and Matthew A. Cronin. 2012. “How Near-Miss Events Amplify or Attenuate Risky Decision Making.” Management Science 58 (9): 1596–1613.
Robin Dillon-Merrill and Catherine H. Tinsley. 2005. “‘Whew! That Was Close’: How Near-Miss Events Bias Subsequent Decision Making Under Risk.” Academy of Management Proceedings 1: B1–B6. Briarcliff Manor, NY 10510: Academy of Management.
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