From the Founder: What is the Market Issue of the Day?

Recently, someone forwarded to me the following blog post from Joe Wiggins, the head of research at a large U.K. wealth manager. He suggests the following life cycle of an economic or stock market issue of the day:

Stage 1: A news story becomes the focus of investor & market attention.

Stage 2: We greatly overweight its long-term importance.

Stage 3: We develop “shallow expertise” and a passable opinion on the subject.

Stage 4: We calculate our “exposure” to the issue.

Stage 5: We inaccurately predict how financial markets will be impacted.

Stage 6: We either make a poor decision or have to justify not making one.

Stage 7: We move on to the next in-the-spotlight news story.

Stage 8: We entirely forget what we said in Stages 1-6 within a few months.

Mr. Wiggins continues:

“For any investor with a reasonably long time horizon, attempting to ignore whatever the market is focusing on at any given point is the sensible (and most lucrative) approach. Unfortunately, this can be close to impossible for three reasons:

• It is hard to ignore something when everyone else is paying attention to it.

• We are human and thereby exposed to the same perception biases as everyone else. We must work exceptionally hard to behave differently.

• Sometimes something will matter to financial markets in a material way, and ignoring it won’t look smart.”

I thought this was a great way of describing how we tend to respond to financial news. While our advisor team loves divvying up your nest egg and building financial strategies for you, one of the enduring benefits of working with a good advisor team is that they will help you ‘behave differently’ as Mr. Wiggins mentions above.

As I’ve mentioned before, it has been proven that human nature will always fail at investing. It will chase returns out of greed, and it will panic out of fear. If you’ve ever done either or both, congratulations, you are a human!🙂

Our advisor team is here to guide you through whatever the market issue of the day is, and the one after that, and the one after that. We won’t be able to predict what will happen, but we can help ensure your plan is in place and it is the right one for you.

Warmly,

Pat Strubbe