Don’t Let Emotions Interfere with your Investment Plan
Humans don’t always make entirely rational decisions. Studies have shown that even when logic and reasoning clearly point in one direction, people sometimes choose the opposite route, based on personal bias or “wishful thinking,” which is typically driven by emotions. This paradoxical human behaviour is especially prevalent as it relates to financial matters. This might explain why so many investors repeatedly allow their focus to shift to the short term and either question or abandon a long-term strategic plan in favour of short-sighted actions.
At T.E. Wealth, a key responsibility shared by counsellors and consultants alike, especially during times like these, is to reassure clients that doing the right thing in their portfolios entails sticking to a well-thought-out plan. Investment management and financial planning are like a marathon, not a sprint. Most of the current events dominating news headlines and television broadcasts are nothing more than noise and should have no influence whatsoever on long-term thinking. Little good comes from focusing on things that change every day and are beyond our control. In hindsight, perhaps we might have done some things a little differently, but you only get the benefit of 20/20 vision after the fact. One thing that has likely changed little, if at all, since you became a T.E. Wealth client, is your set of investment objectives and as such, neither have investment policies changed drastically.
The tone in the markets has been predominantly bearish of late as various indices, commodities, stocks and ETFs continue to trend lower amid multiple weak economic reports. However, this is just one or a few weeks of data being considered, which is largely meaningless in the context of a multi-year or even multi-decade-long investment horizon.
We are equally pained by negative news and events in the marketplace because our goals are the same as yours; we all want markets and portfolios to advance. Our job is to ensure that you understand the plan in place and know that it continues to make sense for the long haul, which should help you ignore the constant barrage of information.
It’s true that things sometimes don’t go as planned. The question is whether or not the initial plan was flawed or sound and if any changes are needed. Markets moving against a portfolio seldom justify making changes and often signal that they are becoming more attractive. It doesn’t hurt to stay informed, but you need not act on every bit of information that is disseminated. Stay focused on the future, but your eyes should be cast further ahead than the financial media typically encourages or inadvertently fosters. Investment management professionals strive to provide investors with guidance and reassurance that their plan still makes sense, even in the dynamic short-term environment that is the financial space.
Steven Belchetz, MBA, CFA, President & Chief Investment Officer, T.E. Investment Counsel Inc.
June MacKinnon, CFA, Director of Research, T.E. Investment Counsel Inc.
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