Financial Word of the Day: Recency Bias
- Larry Jones
- Dec 10, 2025
- 2 min read
Definition of Recency Bias
Recency Bias is the tendency to give more weight to the most recent information we’ve seen—while ignoring long-term data, history, and trends. In simple terms: what just happened feels more important than what usually happens.
And in money decisions, that can get expensive fast.
How Recency Bias Shows Up in Real Life
You see this constantly in investing.
The market drops hard for two weeks? Suddenly everyone thinks the economy is falling apart.The market rallies for a month? Now people believe stocks “only go up.”
Neither is true—but recency bias makes the latest headlines feel like permanent reality.
It also shows up in your personal finances:
You splurge this month because last month “was stressful.”
You stop investing because your account dipped recently.
You avoid a great opportunity because you remember one bad experience.
Your brain quietly says, “This just happened… so this must be how things always work.”
That’s recency bias driving the car.
A Quick Example
Imagine this conversation: “Man, the market’s been awful lately. I think I’m going to pause investing until things settle down.”
Translation? Recent losses feel bigger than years of long-term growth.
Ironically, this is usually the worst possible time to stop investing.
Why Recency Bias Is So Dangerous with Money
Recency bias causes you to:
Chase hype at the top
Panic at the bottom
Abandon solid long-term strategies
Make emotional decisions instead of disciplined ones
It tricks you into reacting instead of planning. And money rewards planners—not reactors.
How to Beat Recency Bias (Without Needing a Finance Degree)
Here’s the simple counterpunch: Zoom out.
Instead of asking:“What happened this week?” Start asking:“What’s happened over the last 5, 10, or 20 years?”
Markets go up and down. Businesses rise and fall. Life gets rocky and then smooth again. That’s normal. Recency bias only feels powerful because your brain has terrible long-term memory under pressure.
Other practical fixes:
Use automatic investing so emotions stay out
Write down your long-term plan when times are calm
Limit financial news consumption when emotions run hot
Make decisions based on data, not headlines
The Wealth-Building Takeaway
Recency bias convinces you that today’s mood should control tomorrow’s money.
But wise wealth builders do the opposite: They let long-term truth overrule short-term emotion.
Short-term noise is loud. Long-term results are quiet—but powerful.
Financial Word of the Day in a Sentence
“I didn’t panic-sell this time—I realized recency bias was trying to convince me that the last bad week meant the market was broken.”
If you want to grow real, lasting wealth, learning to spot recency bias might save you thousands—if not hundreds of thousands—over a lifetime.
Because what just happened feels important…But what you stick with long-term is what actually makes you rich.
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