A magazine editor recently read my book, The Emotional Investor, and I gave him permission to use what he learned extensively for this article. I give you the first few paragraphs of his article below and then a link to the original source since he authored it. I hope you like it.
10 Destructive Behaviors of Emotional Investors
Financial advisors and their investor clients have faced a period of huge market swings in 2020 and great investment uncertainty in the fallout of the COVID-19 pandemic. (Not to mention the emotional burden of concern for loved ones, for their safety, and for those families around the world who have lost a cherished family member.)
The American Association of Individual Investors (AAII) developed Figure 1, showing the market’s roller-coaster ride for the period from late February to late April 2020. The organization noted, going back to 2011, “the largest number of days in a single calendar year with a closing change in the S&P 500 index of greater or less than 2% was 35—for the year of 2011. … We’ve already experienced 30 such days for 2020.”
With the CBOE Volatility Index (VIX) hitting elevated levels not seen since the financial crisis, and major U.S. equity indexes rapidly entering bear market territory, Q1 2020 made managing risk—and investment expectations—a more urgent consideration for financial advisors and their clients.
However, this was really nothing new. For some time, a top concern of financial advisors of all stripes has been the management of volatility. This became particularly pronounced after the market drawdown of almost 20% in Q4 2018…