In This Issue:
- Advisors Out and About
- Market Update
- Would You Drive Looking Through the Rear-View Mirror?
Advisors Out and About
What an incredible Saturday at the Financial Planning Association (FPA) Southern California Summit at UC Irvine!
We had folks from FPA of Los Angeles (FPALA), Financial Planning Association (FPA) of San Diego, and FPA of Orange County, CA all come out. The energy in the room was unstoppable as nearly 100 financial planning professionals, students, emerging advisors, and seasoned leaders, came together from across southern California to learn, connect, and grow.
The event was a powerful reminder of what happens when our financial planning community shows up with purpose.
Highlights from the day included:
- A strong turnout of students and next-gen planners who brought fresh perspectives and enthusiasm for the profession.
- An inspiring keynote from Altruist, setting the tone for growth, innovation, and impact.
- A dynamic cross-chapter panel featuring leaders from all regions, including Kaiyo Partner & Advisor Jeremy Kovacevich, sharing insights on collaboration, career development, and the future of financial planning.
- Engaging breakout sessions led by passionate professionals from chapters across the region, covering case studies, firm ownership & partnership, and current state of the economy.
Market Update
As of Oct 30, 2025*
- S&P 500 is up 17.20% YTD
- Dow Jones Industrial Average is up 13.24% YTD
Please keep in mind that while the S&P 500 and Dow Jones Industrial Average provide insight into a segment of the market, individual portfolio returns will vary due to diversified asset allocations designed to balance risk and opportunity across different asset classes.
*Year-to-date performance data provided by S&P Global and reflects the total return of the S&P 500 and Dow Jones Industrial Average indices.
Would You Drive Looking Through the Rear-View Mirror?
“Don’t gamble,” Will Rogers said. “Take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.”
Enjoy this article from our partners at Avantis Investors.
by Meir Statman, Ph.D.
The Psychology Behind Hindsight Bias
The psychologist Baruch Fischhoff, who introduced us to hindsight shortcuts and errors, wrote, “In hindsight, people consistently exaggerate what could have been anticipated in foresight. … People believe that others should have been able to anticipate events much better than they actually did. They even misremember their own predictions so as to exaggerate in hindsight what they knew in foresight.”
Hindsight errors are the belief that whatever happened was bound to happen, as if uncertainty and chance were banished from the world. So, if an introverted man marries a shy woman, it must be because, as we have known all along, “birds of a feather flock together,” and if he marries an outgoing woman, it must be because, as we have known all along, “opposites attract.”
Similarly, if stock prices decline after a prolonged rise, it must be, as we have known all along, that “trees don’t grow to the sky,” and if stock prices continue to rise, it must be, as we have equally known all along, “the trend is your friend.”
Hindsight errors are a serious problem for all historians, including stock market historians. Once an event is part of history, there is a tendency to see the sequence that led to it as inevitable. In hindsight, poor choices with happy endings are described as brilliant choices, and unhappy endings of well-considered choices are attributed to horrendous choices.
Yet not all hindsight is about errors. Indeed, good hindsight shortcuts serve as good instructors, teaching us to repeat actions that brought good outcomes and avoid actions that brought bad ones. We studied for exams and aced them. We learned that acing exams is the likely outcome of studying for exams.
Distinguishing Between Hindsight Shortcuts and Errors
Hindsight shortcuts are always precise when one-to-one associations exist between past and future events, actions and outcomes, and causes and consequences. However, hindsight shortcuts can easily turn into hindsight errors where randomness and luck are prominent, loosening associations between past events and future events, actions and outcomes, and causes and consequences.
Hindsight errors might arise from unawareness of the influence of randomness and luck or from a desire to see the world as predictable, devoid of randomness or luck.
We ace an exam without studying when luck is good and exam questions match whatever we remember from the few classes we attended. But when luck is bad, we fail the exam and perhaps the course. Hindsight errors can mislead lucky students into thinking that they can ace exams without studying and can mislead unlucky students into thinking that studying for exams is futile.
Hindsight errors underlie consequence-cause matching. We err by inferring causes from consequences we know only in hindsight, as if we had known these consequences in foresight. People inferred that a computer crash had a large cause, such as a widespread computer virus, if it had a large consequence; for example, Adam lost his job. However, they inferred that the identical failure was more likely to have a smaller cause, such as a cooling fan malfunction, if the consequence was small; for example, Adam graduated on time. Yet the consequence gave no information about what caused the crash.
In a 2017 Wall Street Journal article, I noted the need for diversification because of the difficulty of identifying winning investments in foresight. A reader objected. “Look at it this way,” he wrote. “Start with 10 funds to choose from,” and “weed out at least half of the managers as poor performers. … Now select the ‘average’ from among those left … and you’ll end up in the top quartile and beat the market.”
Another reader, however, noted the error of hindsight. “Do you drive your car by looking through the windshield or the rear-view mirror?”