Why status quo bias matters
Inertia can leave portfolios unrebalanced, expensive, concentrated, or inconsistent with changed goals.
How it is applied
Investors use default reviews, scheduled rebalancing, fee comparisons, updated IPS constraints, and explicit reasons for retaining each holding.
Portfolio example
An employee keeps all retirement savings in a default fund long after risk and horizon change.
How to interpret it
Maintaining a position can be optimal, but should follow active review rather than inattention.
Limitations and common misconceptions
Frequent change also creates costs and behavioral mistakes. Good defaults can improve outcomes.
Sources and further reading
- The Behavioral Biases of IndividualsCFA Institute
- Behavioral Patterns of U.S. InvestorsU.S. Securities and Exchange Commission