The main theme we want to communicate during 2016 is that of Ideas versus Impulses. Good ideas, based on evidence make up the foundation of our financial planning philosophy. These trump, (or should trump), momentary impulses based on day-to-day happenings in the markets (like the first week of this year) or in the larger world.
Importance of Behavior
We have written several times about the importance of behavior, what we actually do, within the realm of personal financial planning. In periods of stress, our brains often switch into panic mode and it is easy to undo well-laid plans in the midst. Without a strong undergirding philosophy, panic overwhelms logic.
The broad stock market is positive in about 54% of the individual days, but 68% of the quarters and 74% of the years. Time is on your side…if you allow it to be. Here is a link to an excellent (and very brief) piece by Behavioral Economist Dr. Daniel Crosby. Dr. Crosby lists five stress-induced thoughts that many investors have during periods of high variability. Of these, I would say that the final one “This is the End of the World” is the one we tend to see most.
For further evidence, take a quick look at this brief video that summarizes some research from the U.K. on stress related financial decisions.
Our primary mission, our “Why” is “To make our clients’ lives better”. The way that we do that starts with evidence driven education. This education serves as a counter to the popular (but very dangerous) financial news media that is mostly concerned with the next hour, not the next decade.