Fix It Friday Ep. 31 - Flying, Driving, Investing….and Availability Bias

• Our emotions often overestimate memorable risks while underestimating long-term ones.

• Market volatility is temporary; inflation quietly reduces purchasing power over time.

• Availability bias can cause investors to make emotional rather than rational decisions.

• Successful investing requires focusing on long-term probabilities instead of short-term headlines.

Disclaimer: [00:00:00] The following podcast by Fusion Family Wealth LLC, Fusion, is intended for general information purposes only. No [00:00:05] portion of the podcast serves as the receipt of, or as a substitute for, personalized investment advice from Fusion or any other investment professional of your choosing. [00:00:10] Please see additional important disclosure at the end of this podcast.

A copy of Fusion's current written disclosure brochure discussing our advisory [00:00:15] services and fees is available upon request or at www.fusionfamilywealth.com.

Jonathan Blau: Hey, welcome to [00:00:20] another episode of the Fix It Friday version of the Crazy Wealthy podcast. Thanks for [00:00:25] joining us. Today I'm gonna talk about something that, um, th- that deals with what I call [00:00:30] the availability bias, and I'll describe that.

It's when we put more emphasis on not [00:00:35] the probability of an event occurring, but how available to our recent memory is an [00:00:40] event like that today, and they're two different things. So title of today's podcast [00:00:45] is Flying, Driving, Investing, and Availability Bias.[00:00:50]

Voiceover: Welcome to the Crazy [00:00:55] Wealthy Podcast with your host, Jonathan Blau. Whether you're just starting out [00:01:00] or are an experienced investor, join Jonathan as he seeks to [00:01:05] illuminate and demystify the complexities of making consistently rational financial [00:01:10] decisions under conditions of uncertainty. He'll chat with professionals from the advice [00:01:15] world, entrepreneurs, executives, and more to share fresh perspectives [00:01:20] on making sound decisions that maximize your wealth.

And now, here's your [00:01:25] host

Jonathan Blau: So I'm gonna start off with a question. [00:01:30] Would you rather fly across the country or drive? Most people feel safer driving. [00:01:35] The statistics say they're wrong, really wrong, and investors make the [00:01:40] exact same mistake. Most people are more afraid of flying than driving. When you're on [00:01:45] a plane, you feel every bump.

Turbulence gets our attention, and we're not in [00:01:50] control. Someone else is flying the plane, and when things get shaky, it feels awfully [00:01:55] dangerous. Yet statistically, flying is far safer than driving. Investing is [00:02:00] actually very similar. The market's version of turbulence is what's called volatility, [00:02:05] the up and down sharp movements around the long-term trend lines.

We see [00:02:10] headlines, watch account values fluctuate, and feel uncomfortable because it seems [00:02:15] risky, especially given that we're not in control of what's going on with our portfolio at any given [00:02:20] time. But here's the key. Volatility is uncomfortable. [00:02:25] Inflation is dangerous. We must not conflate temporary [00:02:30] discomfort with permanent danger.

Volatility is temporary turbulence. Inflation [00:02:35] is a slow leak in our financial plan Many investors try to avoid the discomfort of [00:02:40] market volatility by moving to things like cash, certificates of deposit, [00:02:45] bonds, or other investments that feel safer. The problem is that while those [00:02:50] choices may reduce the short-term bumps, they can increase the risk that inflation slowly [00:02:55] erodes the purchasing power of our dollars over the long term.

It's like choosing to [00:03:00] drive across the country because flying makes you nervous. The option that feels safer may actually [00:03:05] carry the greater long-term risk. Part of the reason we get this wrong is something [00:03:10] psychologists call availability bias. We tend to overestimate risks that are [00:03:15] vivid, memorable, and heavily reported.

Plane crashes make national [00:03:20] news. Millions of safe takeoffs and landings do not. Market crashes [00:03:25] dominate headlines. Decades of market compounding and wealth [00:03:30] creation rarely make those headlines. In reality, stock markets have produced positive returns far [00:03:35] more often than negative returns, and the magnitude of the gains has historically far exceeded [00:03:40] the magnitude of the losses over long periods of time.

Yet investors focus on [00:03:45] the rare crash rather than the far more common recovery and growth to new highs that [00:03:50] follow. So what's the fix? Don't conflate discomfort with danger. [00:03:55] Turbulence doesn't mean the plane is crashing. Market volatility doesn't mean your financial [00:04:00] plan is failing. The real risk isn't the volatility that grabs your attention today.

It's the [00:04:05] inflation that quietly steals your purchasing power over decades. A portfolio [00:04:10] heavily weighted toward ownership of great businesses has historically offered investors a far greater [00:04:15] probability of preserving and growing purchasing power than one heavily weighted toward [00:04:20] fixed dollar assets or cash equivalents.

Just as flying often [00:04:25] offers the highest probability of reaching a distant destination safely, [00:04:30] owning great businesses has historically offered investors one of the highest [00:04:35] probabilities of reaching distant financial goals. The goal isn't a smooth ride. It's [00:04:40] arriving safely at your destination. In flying and in investing [00:04:45] alike, the turbulence that gets our attention is often far less dangerous [00:04:50] than the risks we rarely notice.

I hope you enjoyed this version of today's [00:04:55] Fix It Friday. You can find us on the fusionfamilywealth.com website, [00:05:00] crazywealthypodcast.com, and all of your favorite podcast venues. Have a great [00:05:05] weekend. Until next time.

Voiceover: Thank you for tuning in [00:05:10] to another episode of the Crazy Wealthy Podcast. For more insights, [00:05:15] resources, and to sign up for our newsletter, visit crazywealthypodcast.com. [00:05:20] Until then, stay crazy wealthy[00:05:25]

Disclaimer: The previous podcast by Fusion Family Wealth [00:05:30] LLC, Fusion, was intended for general information purposes only. No portion of the podcast serves as the receipt of, or as a substitute [00:05:35] for, personalized investment advice from Fusion or any other investment professional of your choosing. Different types of investments involve varying degrees of [00:05:40] risk, and it should not be assumed that future performance of any specific investment or investment strategy or any non-investment related or planning services, [00:05:45] discussion, or content will be profitable, be suitable for your portfolio or individual situation.

Neither Fusion's investment advisor registration status nor any [00:05:50] amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Fusion is engaged or continues to [00:05:55] be engaged to provide investment advisory services. Fusion is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or [00:06:00] accounting advice.

No portion of the video content should be construed by a client or prospective client as a guarantee that he or she will experience a certain level of [00:06:05] results if Fusion is engaged or continues to be engaged to provide investment advisory services. A copy of Fusion's current written disclosure [00:06:10] brochure discussing our advisory services and fees is available upon request or at www.fusionfamilywealth.com.