Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.
In an upcoming Proactive Advisor Magazine article, the author (a successful financial adviser) writes about a behavioral finance issue affecting several of his clients.
As opposed to the typical fear seen in severe market declines, these clients are fearful about the sustainability of the massive market rally since March 2020. Whether you call it fear or greed, they do not want to see their current portfolio gains diminished.
This week, I want to talk about a well-documented pattern of investor behavior that does not serve their best interests: letting emotions rule investment decisions. We originally posted a version of this article last year just before the COVID crash.
I’m sure most of you noticed the recent spike in market volatility during the last week of January, related in part to the highly unusual trading in heavily shorted stocks such as GameStop and AMC. The VIX volatility index, known as the market’s “fear gauge,” jumped to 37 on Wednesday, January 27. According to Bloomberg, this was “the biggest one-day move since the pandemic-spurred market crash” in March 2020. CNBC reported that the VIX closed on January 29 “with its biggest weekly gain since June .”
Over 2,500 years ago, in what may have been one of the earliest examples of behavioral finance theory, ancient Greek philosopher Aristotle is reported to have said the following regarding the achievement of success.
This year has been somewhat like a master class, or real-time laboratory, in illustrating some classic concepts of behavioral finance in a compressed time frame.
Think about it.