You’re presented with two 401k investments, one you immediately recognize and the other you don’t. Which do you pick? Many participants will pick the one that is most familiar, without sufficient evidence that is the best for them. Familiarity can make investments feel less risky even if, in reality, they are not. Familiarity can also lead to other problems including lack of diversification.
In this short video, (2 minutes) Evan Levine, president and founder of Complete Advisors will discuss the first main problem that results from Familiarity Bias: Concentration Risk