A client inherited employer stock several years ago. The shares now represent 55% of her $2 million investment portfolio. She is reluctant to sell because she believes the company has excellent long-term prospects.
What behavioral bias is the client MOST likely exhibiting?
Familiarity bias occurs when investors overinvest in companies or investments they know well, such as their employer or a local company. This often results in inadequate diversification and increased portfolio risk.
