Independent Wealth Management
Who scrutinizes your investments, designs and tests your retirement and education plan, searches for new investment ideas, patrols insurance agents and mortgage brokers, shows you strategies designed to reduce your investment costs and income taxes, monitors your 401(k), promptly responds to your email, provides one monthly statement, day-to-day net performance across all of your accounts and does all of your paperwork...We do!
Entries in Behavioral Finance (7)
Investors Behaving Badly
Behavioral Finance explores the way investors make decisions. Economists presume we are rational human beings, coldly weighing the pros and cons of our decisions. The reality is that we don’t behave that way, we have bias’ and emotional attachments. Here are three psychological tendencies that, if you can avoid, will probably lead to better investment decisions.
Anchoring – The idea that investors put too much emphasis on irrelevant data. An example is the break-even fallacy. Often investors realize they have made a mistake...
Magazine Cover Indicator
An old adage on Wall Street is - "sell when Business Week's cover says buy."
The most famous example of this is the 1979 Business Week cover "The Death of Equities." Some facts from the article: Baby boomers won't save. Gold is a safe long term bet. In retrospect, equities were as inexpensive as they were during the Great Depression…and were on the verge of a historic bull market lasting until 1999.
How could Business Week have been so wrong? We would suggest that it is because the publication's staff does a wonderful job of merely reflecting the conventional wisdom. The editors and staff cannot...
Rafael Velez
in Behavioral Finance
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The Enemy of Performance - You!
In our practice, we encounter enthusiastic new investors who devour current editions of Money Magazine, Forbes or the Wall Street Journal in an effort to accelerate their personal learning curve and become more educated about the market. In reality, they may be better off combing through back issues of Psychology Today – because there is considerable evidence that investor behavior is the key determinant to long term results.
