Allocate Assets: Do Emotions Affect Your Investment Decisions
Fear and Exuberance Destroy Portfolios
Some years ago a study was done at one of the leading mutual fund groups. The
equity funds of this particular fund group had average annual returns of about
10% over the 10 years surveyed. Over that same period, the average investor in
these same funds achieved an annual return of about 2%. The reason? Emotion.
It is far too
common that ordinary people buy into the market after they hear
of recent gains, and then sell in a panic when events go south. Think of all the
people who ignored the internet in the early 90s then jumped in toward the end
of the decade only to be burned in 2000. Or recall the occasional real estate
bubbles, and busts. People get excited over the prospect of easy money, then get
scared when it looks like all will be lost. Making matters worse, brokers are
trained to take advantage of emotions so they can sell fee-laden products that
theoretically address fear or eagerness, whatever the current mood.
How P3 Can Help
provides a steadying influence, guided by principles and math, not
emotion. In addition to a planning platform modeled on long term market
characteristics and timeless fundamentals, brings to your computer forums,
articles, and updates that explain in plain English market events, their causes,
logical outcomes, and helpful strategies. No one can predict the future.
But uncertain events are best analyzed with a calm perspective
unclouded by panic or glee.