Be Unemotional!
We are smart people. We are experienced, educated, well read and have more information available to us than ever before in previous decades. If this is the case, why do so many continue to want to make financial decisions based not on what we’ve learned, but on raw emotion?
We talk to our clients about the benefits of diversification, which in its purest form means we will have some investments that do better and those that do worse.
We talk about correlation that, again, if done right investments will not move in lockstep.
We talk about asset allocation and how applying a systematic and unemotional approach to investment selection can help you achieve your goals.
Yet, the other day a client wanted us to react to an investment that was performing poorly. How can this be?
Can we predict the market? Absolutely not.
Can we tell you what’s going to happen tomorrow? Absolutely not.
Will you never experience investment risk? Absolutely not.
Unfortunately if we think we need to beat the market, time the market and pick the market we will be in search of the Holy Grail of investing. We’ll always be reading, listening and looking for what is better now and not for the long-term. Will this lead to a happier life for you? Maybe, but more than likely not.
We work hard to create a process and a system to take emotion out of what we are doing to hopefully increase our probability of success. For most of our clients this philosophy and process of planning, being systematic and prudent with portfolios and thoughts helps them to lead a more peaceful life and achieve more in the process.
No strategy can assure a profit or protect against a loss.
The next time you’re tempted to dissect your portfolio and throw out what’s out of favor and underpriced, remember this. Unless you have a prudent strategy, are diversified properly and have low correlation, you are probably better off going out to the barnyard and helping the dog chase its tail!
I can think of much better ways to spend my time, I hope you can too.
Sincerely,
Wayne von Borstel, CLU, ChFC, MSFS
Personal Financial Advocate
