Your Feelings Are Killing Your Profits – the Fix is Easier than You Think
By Angel Clark of VectorVest
How much impact does the news, and the emotion-driven decisions it causes, have on the stock market’s long-term growth? Loring Ward, a firm that provides investment management services to independent financial advisors and their clients, posed their theory via a clever YouTube video in which the viewer embarks on a journey through seven decades of Time Magazine headlines as they plot the growth of a single $1.00 invested in the U.S. stock market from 1927-2012.
The video illustrates the market’s incredibly persistent rise despite being hit again and again with what should be crippling news. Corrections, sometimes severe, were unavoidable but inevitably healed with time and the market came back stronger than before. The moral of the story, as I see it, is “don’t worry, be happy;” you should stay in a state of rosy complacence because the market will always triumph in the end. I wonder if they would feel the same if their portfolio was down 40-60% and they were looking to retire next year… or if this is just advice that should be given to clients?