A Different Degree of Wealth

How the Fundamental Attribution Error and Hindsight Bias can Lead to Poor Investing

We all know that we have biases—ways that we choose to filter the world so we can make sense of it.

A bias can be as minor as a preference for one kind of food over another. Some people think sushi is the greatest culinary dish ever created. Others wouldn’t try it if you paid them.

Stronger biases might include our allegiance to our college sports team, or loyalty to a particular political party. But at least in these cases we’re aware we’re playing favorites.

The strongest biases are the ones we simply take for granted. And because we accept them uncritically, these are the ones that can lead to poor decision making in both investing and life in general.

One of the most prevalent is what psychologists call the Fundamental Attribution Error. It’s our tendency to attribute our own less-than-perfect behavior to factors outside our control, while attributing others’ poor behavior to their personal character. “In other words,” writes Harvard Business School’s Patrick Healy, “you tend to cut yourself a break while holding others 100% accountable for their actions.”1

We can often observe this bias in ourselves when someone cuts us off in traffic. From that one action we immediately conclude that they are a rude, antisocial person. However, when we find ourselves running late for an important appointment, we like to think that our own driving is completely understandable given the circumstances.

The Hindsight Bias is another way we flatter ourselves.

In this case we look back on significant events and convince ourselves that we saw them coming. According to the Association for Psychological Science, the situation may be different each time, but we hear ourselves say over and over again: “I knew it all along.”2

How can these two powerful biases lead to potentially poor investment results?

If you’re trying to “beat the market,” the Fundamental Attribution Error can lead you to believe you know the reasons for a company’s actions, thus causing you to erroneously predict how their stock will perform in the future.

The Hindsight Bias can influence your thinking that the future is more predictable than it actually is. Identifying and relying on past performance of stocks, markets or so-called outperforming fund managers can convince you about the future outcomes for certain stocks, sectors or “superior” fund managers.

In both cases, the biases can lead you to act like you have all the information, when in fact you have only partial knowledge or wrong information.

A more prudent approach for investing without the negative effects of these biases is to own a broadly diverse portfolio that is allocated using a strategy that is not dependent on consistently predicting the future—something the complexity of the market makes impossible.

Bias-free investing can benefit your long-term chances for retirement success. As always, we are happy to discuss how this serves your personal plan.

Have a great weekend!

Source: Efficient Advisors

Golf Tip of the Week

Get Your Speed Right with this Putting Drill

A lot of golfers think the key on long putts is speed and shorter putts are more about line. Actually, speed is critical on all putts. The pace of the ball dictates the size of the hole. If you hit a putt firmly, the effective width of the cup might be two inches, but if the ball is rolling slowly, the cup might play twice as wide. So, let’s work on your speed with this putting drill.

Here’s a great drill. Set up an imaginary box using four tees, three feet wide and about a foot-and-a-half deep. Drop three balls five feet from the center of the box, and try to roll all three into it. If a ball doesn’t come to rest inside the boundaries, start over. Once you get all three, move back two feet, and do it again. Then go back another two feet, and so on, until you’re about 15 feet out. Remember, a miss means you have to start over from that distance. This isn’t an easy drill, but when you get good at it, you’ll have distance control—and you’ll make a ton more putts.

Tip adapted from GolfDigest.comi

Recipe of the Week

3-Ingredient Chocolate Mousse

[8 people]


  • 2 x 13.7oz cans full fat coconut cream
  • 2 tablespoons confectioners sweetener (or confectioners | icing sugar if not counting carbs)
  • 3 tablespoons unsweetened cocoa powder
  • pinch of salt (optional! About 1/4 teaspoon. Adjust to your tastes)
  • 20 g | 2 squares 70% chocolate, shaved (optional for extra richness — or sugar free chocolate chips)
  • extra shaved chocolate to garnish


  1. Place sealed cans of coconut cream in the refrigerator overnight. Without shaking the cans, open carefully and scoop out the thick cream sitting at the top above the water. Transfer the thick hard cream to a bowl and discard all of the liquid left in the bottom of the cans (or reserve to add into smoothies later).
  2. Add the sweetener (or sugar if using) and beat on high using a hand mixer (or whisk) until thick and creamy (about 1-2 minutes). Reserve about 4 tablespoons of the plain ‘whipped cream’ to use as a topping to serve with and set aside.
  3. Fold the cocoa powder and salt through the cream and beat (or whisk) again until smooth, well combined and thick. Fold through the shaved chocolate if using. Depending on the coconut cream you use, a mousse will form almost immediately once the cocoa powder is mixed through. If not, refrigerate until set and ready to serve, or serve immediately. Dollop the ‘plain whipped cream’ over the mousse and sprinkle with shaved chocolate (if using).

Recipe adapted from Cafedelites.comii

Health Tip of the Week

Natural Stress Remedies for Right Now

Even if you’re not prone to panic, dealing with day-to-day life during the coronavirus pandemic is enough to trigger anxiety even in the most steadfast of us. Here are four natural ways to help manage stress.

  1. Fuel up with the right foods: be sure your diet includes fatty fish (a fish oil supplement), probiotic-rich foods (pickles, sauerkraut, kefir), leafy greens (spinach), protein in the morning (eggs), and certain spices (like saffron, curcumin, ginger).
  2. Be mindful: practice mindfulness meditation techniques and yoga. One easy exercise involves going no further than your own pantry. Grab an orange or other citrus fruit, and then take some time to really examine it as if you’d never seen it before. Engage all five senses—sight, smell, taste, touch, and hearing.
  3. Stay active—especially outdoors: you probably already know that exercise is good to both boost your mood and health. But taking any workout or walk outdoors reaps even more anxiety-busting benefits. 
  4. Set a power-down routine: try resetting your nighttime routine by taking a warm bath or shower 90 minutes before bed, give yourself a digital curfew (no electronics), and finish with some deep breathing exercises before bed.

Tip adapted from AARPiii

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The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

The articles and opinions expressed in this newsletter were gathered from a variety of sources, but are reviewed by Ballentine Capital Advisors prior to its dissemination. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices.

Securities through Triad Advisors, LLC, Member FINRA/SIPC. Advisory services through Ballentine Capital Advisors, Inc. Triad Advisors and Ballentine Capital Advisors are not affiliated entities.


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