Fix It Friday - Beware Allowing the Illusion of Predictive Value to Influence Portfolio Decisions!

Welcome to Fusion Fix-It Fridays, the podcast that simplifies financial strategies to help you make smarter decisions. Hosted by Jonathan Blau, CEO of Fusion Family Wealth, each episode dives into common biases that impact our financial choices—and how to fix them. Today, Jonathan tackles the illusion of predictive value, a bias that leads us to overestimate the reliability of predictions, including those made by experts. He shares real-world examples, practical advice on making portfolio decisions, and insights into what separates successful investors from those who fall short. Plus, don’t miss Jonathan’s favorite quote on the pitfalls of overconfidence. Let’s get started!

IN THIS EPISODE:

• [1:04] Jonathan’s topic is the bias called the illusion of predictive value.
• [2:56] Jonathan shares a story supporting the bias 
• [5:31] Jonathan advises when portfolio decisions should be made and describes successful and unsuccessful investors
• [8:25] Jonathan shares his favorite quote on predictive value

KEY TAKEAWAYS:

• Overestimating the reliability of our own or others’ predictions, particularly those of experts, often leads to poor decisions. The defining characteristic about the future is that there are no facts about it, making predictions inherently unreliable.
• Successful investors stick to long-term goals and plans, avoiding reactive changes based on short-term market performance, current events, or expert predictions. Adjusting portfolios should only happen when personal circumstances or goals change.
• Studies, such as those by Phil Tetlock, show that expert forecasts are correct about 49% of the time, akin to a coin flip. Moreover, the most famous or confident-sounding experts often have the least accurate predictions.

ABOUT THE HOST: Jonathan is the President and CEO of Fusion Family Wealth, founded in 2013 to focus on behavioral finance and guide clients toward rational financial decisions. A sought-after speaker in wealth management, Jonathan previously held senior roles in tax and estate planning at Arthur Andersen. He has a BS in Finance, an MS in Taxation, and an MBA in Accounting. Based on Long Island, Jonathan is active in the local business community, supports causes like the Middle Market Alliance and Sunrise Day Camp, and enjoys boating with his family.

RESOURCE LINKS 

Fusion Family Wealth - Website

Jonathan Blau - LinkedIn

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Bias, Predictions, Investing, Fusion Family Wealth, Portfolio, Financial Planning, Expert Forecasts, Illusion Of Predictive Value, Long-Term Goals, Decision-Making, Market Performance, Overconfidence, Successful Investors, Planning-Driven Strategies, Economic Trends, Investor Psychology