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"My Two Cents"- INVESTOR BEHAVIOR by Nick Silva

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Did you see what the market did today? This week? This month?

Boy, if I had a nickel for every time I heard this.

My natural response is “Who cares?”

Most of the clients, prospects, family and friends I speak with are not day traders. They are investing the majority of their money for a long term goal such as retirement or a child’s education.

Generally, these long term goals align with a 10 to 30 year time horizon. So why are most people so concerned with a short term market move, such as 1 day or even 1 month? Most likely because a co-worker, a brother in law, or CNBC pointed it out with emphasis, to portray some sort of significance and applicability to them.  

To put things in perspective, consider this:  10 years = 3,650 days and 30 years= 10,950 days. So how much weight does a 1 day, 1 week, or even 1 month market move have on your long term return? See my point?


Just in case you are a more visual learner, I love this simple sketch included up on the right by Carl Richards from his well known book “The Behavior Gap” *Hypothetical example is for illustrative purposes only.

The main point here is to keep in line with your long term plan, and learn to ignore all of the hoopla and noise, as almost all of it will have no measurable effect on your plan. It can be difficult for us to think long term, but we must trust the process: save the right amount, diversify(1), and periodically rebalance. It may be mundane, but I believe that it will give you the best probability of long term success.

The urges we feel to make money moves based on the abundance of new information can be credited to our innate behavioral instincts. In the next post, we will dive into more detail on instinctual behavior, how it often leads to bad money moves, and how to help control it.

 

(1)Asset allocation and diversification do not guarantee a profit or protect against investment loss, but are intended to help manage your goals and risk tolerance.  They are methods used to help manage investment risk.

The information provided is general and intended to inform and educate. It is not intended as an offering of any specific products or services, nor to be construed as specific investment, legal or tax advice.

Individual situations can vary, as such; this information should only be relied upon along with an individual assessment in light of your own specific situation.

This award was issued on 02/01/2024 by Five Star Professional (FSP) for the time period 04/10/2023 through 10/31/2023. Fee paid for use of marketing materials. Self-completed questionnaire was used for rating. This rating is not related to the quality of the investment advice and based solely on the disclosed criteria. 4,421 Boston-area wealth managers were considered for the award; 580 (13% of candidates) were named 2024 Five Star Wealth Managers. The following prior year statistics use this format: YEAR: # Considered, # Winners, % of candidates, Issued Date, Research Period. 2023: 3,923, 578, 15%, 2/1/23, 5/23/22 - 1/6/23; 2022: 4090, 513, 13%, 2/1/22, 5/24/21 - 11/19/21; 2021: 4069, 480, 12%, 2/1/21, 5/25/20 - 11/30/20; 2020: 3580, 463, 13%, 2/1/20, 4/1/19 - 12/13/19; 2019: 3619, 566, 16%, 1/1/19, 4/18/18 - 11/6/18; 2018: 2819, 532, 19%, 1/1/18, 3/23/17 - 11/10/17; 2017: 2467, 623, 25%, 12/1/16, 3/26/16 - 11/23/16; 2016: 2530, 632, 25%, 12/1/15, 5/18/15 - 11/6/15; 2015: 3542, 801, 23%, 1/1/15, 5/18/14 - 11/6/14; 2014: 1707, 655, 38%, 1/1/14, 5/18/13 - 11/6/13; 2013: 2362, 713, 30%, 1/1/13, 5/18/12 - 11/6/12; 2012: 2591, 454, 18%, 1/1/12, 5/18/11 - 11/6/11.
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(1)Asset allocation and diversification do not guarantee a profit or protect against investment loss, but are intended to help manage your goals and risk tolerance.  They are methods used to help manage investment risk.

The information provided is general and intended to inform and educate. It is not intended as an offering of any specific products or services, nor to be construed as specific investment, legal or tax advice.

Individual situations can vary, as such; this information should only be relied upon along with an individual assessment in light of your own specific situation.

*Winners appearing on this page do not pay a fee to be considered or to win the Five Star Award. Professionals with a digital profile have paid a promotional fee.
Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. The award is based on 10 objective criteria. Eligibility criteria – required: 1. Credentialed as a registered investment adviser (RIA) or a registered investment adviser representative; 2. Actively licensed as a RIA or as a principal of a registered investment adviser firm for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by FSP, the wealth manager has not; A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three settled or pending complaints filed against them and/or a total of five settled, pending, dismissed or denied complaints with any regulatory authority or FSP’s consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through FSP’s consumer complaint process; feedback may not be representative of any one client’s experience; C. Individually contributed to a financial settlement of a customer complaint; D. Filed for personal bankruptcy within the past 11 years; E. Been terminated from a financial services firm within the past 11 years; F. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria – considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. FSP does not evaluate quality of services provided to clients. The award is not indicative of the wealth manager’s future performance. Wealth managers may or may not use discretion in their practice and therefore may not manage their clients’ assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by FSP or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by FSP in the future. Visit www.fivestarprofessional.com.