This chart illustrates the emotional cycle of investing and is at the heart of why investing is so difficult for so many. Once you become aware, you'll quickly realize it's in the financial media and Wall Street brokerage firms' interest to perpetuate this cycle because it hooks you emotionally. If you're not aware, it will convince you that you should be doing something which often means moving money from one investment to another. Always chasing one investment idea after another can result in increased costs reducing return. One could justify this constant movement if it resulted in better returns, but there's little to no evidence supporting this approach.
Removing yourself from this cycle is an important first step in achieving clarity with your investments.
An alternative approach which we recommend it to approach investment management through an Asset Class Investing investment philosophy.
Asset class investing is grounded in academic theory and more than 80 years of economic data on the efficiency of capital markets, the benefits of diversification and impact of investor behavior on investment success. The Asset Class Investing approach provides diversified exposure to asset classes worldwide, captures specific dimensions of risk within each asset class and seeks to enhance returns through prudent trading and cost management.
Our financial philosophy is grounded in: