The concept of “behavioral investment advice” is esoteric because, generally speaking, the only people who know the true value of what it can offer to investors are the advisors who have witnessed first hand the value of said advice. Generally speaking, people who believe advisors are a sham or are overpaid or whatever negative connotation they want to attach can’t accept a value proposition that seems completely intangible on the surface. I don’t blame people for this view since Wall Street hasn’t exactly been the beacon of integrity. But there’s more to it than that.
A quote I offered in a recent article bears repeating here. From Rory Sutherland:
“When we do put a name to non-rational behavior, it is usually a word like ’emotion’, which makes it sound like logic’s evil twin. ‘You’re being emotional’ is used as code for ‘you’re being an idiot.’”
Nobody likes to be called an idiot or even perceived to be one.
Yet, a quote hit me in the most recent Howard Marks memo. [Sidenote: I think his memos are some of the best investing commentaries on the internet.] He says,
“When you find an investment with the potential to compound over a long period of time, one of the hardest things is to be patient and maintain your position as long as doing so is warranted on the basis of the prospective return and risk. Investors can easily be moved to sell by news, emotion, the fact that they’ve made a lot of money to date, or the excitement of a new, seemingly more promising idea. When you look at the chart for something that’s gone up and to the right for 20 years, think about all the times a holder would have had to convince himself not to sell.” [emphasis is from Howard Marks]
That last sentence in particular is true of virtually ALL equity investing. Staying invested through the tech bust of the 2000s, the real estate crisis of 2008, 2011 debt ceiling and dollar downgrade, 2013 taper tantrum, 2018 trade war, and most recently, the 2020 COVID pandemic is a tough ask. Despite the difficult investing terrain of the last 20 years, investors who stayed the course were well-rewarded.
But that doesn’t mean it wasn’t extraordinarily difficult for many investors. Surely, there are investors who can do this alone. But I’ll guess there are multiples of that that would benefit greatly from the attention of a high-integrity, empathetic advisor. We can never know when the time will come that an investor feels the emotional pull to permanently alter the trajectory of their wealth accumulation plan, but it seems likely that it will come at some point. These are the points when an empathetic advisor can truly help.
For what it’s worth, this is not meant to be a judgmental piece toward DIY investors. It’s quite the contrary. I’m aware that most of the readers of my corner of the internet are DIY investors. I want to help everyone which is why I continue to write all the positive articles offering historical perspective hoping to help thousands of people I’ll never meet stay the course to reach their financial goals. Hopefully, I’ve been more than clear about that!
But if you’re someone who is tempted to make portfolio changes during each market hiccup, hiring an advisor isn’t giving up, but an act of infusing hope and confidence toward your own future. If that’s you, we have wonderful advisors here in my office and, if you prefer someone local, I know many highly qualified advisors all over the country that would love to help. Feel free to reach out.
To your success,
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This post is not advice. Please see additional disclaimers.