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On My Best Behavior

[/fusion_text][fusion_text]A couple of weeks ago I went to the big Schwab Impact Conference in Chicago. This is an event that pulls together thousands of independent investment advisors for three full days of amazing content. The conference is so big that at any given time there are close to a dozen breakout sessions to choose from.

Many of the sessions I saw were geared towards behavioral finance. It’s an area I have taken particular interest in. It turns out traditional economics assumed that people always made rational choices with their money. In reality, we don’t. Even a room full of investment advisors had plenty of examples of people making backwards decisions with their money. Yes, I am prone to the same mistakes too.

One of the reasons that we make mistakes is that losses hurt twice as much as gains feel good. If an investment goes poorly in the short-term, it doesn’t necessarily mean you should abandon the idea. But our emotions tell us to do so.

There are two easy ways to make yourself less likely to sell low because of temporary losses.

  1. Do not take too much risk to begin with. The stock market goes up and down. You need to have a plan that you can stick to when it goes down.
  2. Do not look at the stock market daily or weekly. Whether the stock market is up or down today will not affect your ability to retire, but it will make you more likely to let your emotions cause you to do something dumb. A good investment strategy doesn’t require daily attention.

A good investment advisor can help you with both of those steps.[/fusion_text][separator style_type=”single” top_margin=”” bottom_margin=”” sep_color=”” icon=”” width=”” class=”” id=””][fusion_text]

Legal Disclaimer: These posts do not constitute an offer or recommendation to buy or sell any securities or instruments or to participate in any particular investment or trading strategy. They are for informational purposes only. ASA gathers its data from sources it considers reliable. However, ASA makes no express or implied warranties regarding the accuracy of this information or any opinions expressed by the author and may update or change them without prior notification.