We are stopped at regular intervals and asked “when will the market fall?”… The reason behind the question most of the time is that the individual wasn’t invested in the markets and has been left behind. This is the most common behavioral finance issue we see that destroys individual’s long-term returns. It is also a core reason why it is important to have professional assistance in managing your own portfolio.
I did run across a good article in the Washington Post by Barry Ritholtz titled Missed the big market rally? Here’s what to do now. The following are some brief excerpts:
“…I’ve heard all the reasons: Maybe you jumped out of stocks in 2008 and stayed out. Perhaps you were in at the lows, but after the first 20 percent advance, you lost your nerve. The Flash Crash of May 2010 sent you running for cover? Or was it the 19 percent drop before QE2 was announced in August 2010?…..
There’s always some reason that looked good at the time. The asset management business, it turns out, involves a lot more behavioral counseling than you might guess. In any case, the markets have powered upward and onward without you……
..It is a two-part process: The initial steps are designed to help you overcome your risk aversion — the emotional aspects of investing. Call it your “erroneous behavioral economic zone.” After we fix that big underutilized brain of yours, we can move on to the investment steps that allow you to work your way back into markets.”
Click here to read the whole article, and please refer us to anybody that could use help in the future.