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3 Investor Behaviors That Concern Financial Advisors

| January 30, 2019
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3 Investor Behaviors That Concern Financial Advisors

Three things that concern financial advisors that might have an adverse impact an investor’s overall results:

  1. Being a “reverse” bargain hunter. During periods of market volatility, it is not unusual to hear people say, “I don’t want to purchase anything now, I want to wait until the market goes up a little.” That always reminds me of a person who might enter a retail clothing shop when they are having a 25% off sale and the person would say, “I don’t want to purchase anything on sale, I want to wait until the prices go up to buy.” Put in that context, it sounds funny but I think the investment industry is probably one of the few industries where buyer behavior actually is sometimes like that. Buy low, sell high is our goal after all. If prices are down, it may be a time to consider making a purchase or adding to an existing position.
  2. Playing “ostrich”. Over the past 30+ years of my career, I have also heard “I never open my statements” or “I don’t feel like meeting or discussing my portfolio right now”. Opening the statement is important. It enables the investor to check for accuracy. It enables the investor to see performance. It enables the investor to consider risk tolerance and see whether or not risk-mitigation strategies might be prudent. A financial advisor can assist in helping an investor to understand what they own, how it works in different market environments, why they own it, and whether portfolio rebalancing may be in order. Meeting with/conversing with a financial advisor can help an investor know their progress toward their objectives and to determine if staying the course or making some changes might make sense based on the investor’s circumstances.
  3. Having a bad “romance” with a security and blinded by that emotion. “I won’t sell that position regardless of how it performs because my husband worked there for 40 years.” “I inherited that stock from my grandmother so it is untouchable.” “It was the first stock I ever purchased and I know it is awful but I like it as a souvenir.” Regardless of the reason, being overly attached to a security because of a sentimental reason can possibly hurt overall performance. This may lead some investors to have all their eggs in one basket. Having a heavy concentration of a security can potentially hurt in the long run, particularly if that security is in a volatile industry or has had poor results. There may be some strategies that might temper the effect of that concentrated position and an investor should be open to discussing them with their advisor, even if they still wish to maintain the position without selling any shares.

Keeping an open mind and an open line of communication to your financial advisor is important. If you are not presently working with a financial advisor. Many, like myself, offer a complimentary first consultation. We are here for your questions and concerns. We welcome those who may have made financial mistakes, may be new at investing, or may have gone it alone and now need help. Please don’t wait, take the first step and make an appointment - “warts and all”. Your financial future starts now.

The opinions are those of the author. Seek professional advice before taking any action in regard to your finances. This information is provided for general educational purposes only and is not intended to provide specific advice for any individual.

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

Todd A. Slingerland, CFP®

6 Tower Place Albany, NY 12203

(518) 867-4000 x105   todd@4cfp.net   www.capitalfinancialplanning.net

 

 

 

 

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