easy · Certified Financial Planner Psychology
The Parnell household has watched the equity markets rally for three consecutive quarters. They inform their planner that they wish to shift their entire bond allocation into equities because 'the market clearly only goes up now.'
According to the KomFi Academy framework, how should the planner respond to this recency bias?
- Moderate the bias by presenting historical market cycle data showing long-term volatility and reversals.
- Recommend a high-beta mutual fund to capture the continued upside the client expects.
- Adapt to the bias by creating a 'momentum' sleeve in the portfolio while keeping the core allocation intact.
- Execute the trade as requested to honor the duty to follow reasonable client instructions.
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