Portfolio results have a direct correlation to portfolio efficiency. Portfolio efficiency–or portfolio construction–is a primary driver of long-term results, which is the foundation of the Linden Thomas & Co. earnings-focused indexes and private bond portfolios. But what about behavior? Behavioral biases drive investors to make decisions that may jeopardize results due to making the wrong decisions. At the core of every investor, one needs portfolio efficiency! But portfolio efficiency does not ensure results if smart investor behavior doesn’t backup efficiency. So, what is at the core of bad investor behavior? Chasing results! Chasing past results has proven to be the worst thing any investor can do. Often at the core of chasing average results–or what influences investors the most–is seeking to achieve the best returns but not understanding the LIE of average returns! Big Wall Street fund companies have for decades used average returns to attract new investors or keep the ones they have by promoting average returns, yet seldom–if ever–explaining the impact that down markets and volatility have on portfolio value, compared to a portfolio with less return and minimal volatility. So, our team