Definition
Default allocations persist simply because change feels costly or uncertain.
Example
Despite macro conditions shifting materially, a trader keeps the same asset allocation because altering it feels disruptive. Not adjusting becomes the default, even though the existing structure no longer aligns with the forward-looking opportunity set.
Cognitive Driver
Change introduces uncertainty, cognitive effort, and potential regret. Maintaining the current state feels safer and less costly. The inertia becomes self-justifying: because the position exists, it feels appropriate to keep.
Market Expression
Portfolios remain anchored to legacy allocations. Rebalancing is postponed. Outdated exposures linger because exiting requires effort or emotional discomfort. "If it isn't broken, don't fix it" becomes a rationale even when the data suggests otherwise.
Trigger Conditions
- Calm or low-volatility environments
- Familiar long-held positions
- Complex portfolios where adjustment feels costly
- Environments with limited bandwidth for strategic review
- Lack of explicit decision points or scheduled rebalancing
Diagnostic Markers
- Rare or minimal rebalancing despite clear regime changes
- Repeated justification for keeping existing positions without fresh analysis
- Avoidance of reviewing underperforming parts of the portfolio
- Greater scrutiny applied to new ideas than to inherited ones
- Statements such as "let's not disrupt this" or "it's fine as it is"
Cost Profile
- Missed opportunities due to delayed repositioning
- Slow adaptation to macro regime shifts
- Excess concentration in stale themes
- Lower long-term returns due to structural inertia
- Drift between actual portfolio and target optimal allocation
Differentiation From Adjacent Biases
- Not endowment effect: endowment overvalues owned assets; status quo simply resists change.
- Not anchoring: anchoring ties to a number; status quo ties to the existing default.
- Not sunk-cost fallacy: sunk-cost is about past investment; status quo is about avoiding disruption.
Corrective Lens
Introduce explicit review cycles that require rebuilding the portfolio from a zero-base perspective. Compare the current allocation with a fresh construction to quantify the cost of inertia. Treat inaction as an active choice that must be justified with the same rigour as change.