The Power of Dispassion

01/13/2020 - Uncategorized
Closing laptop without passion

Passion. We almost always see it in a positive light. It’s an admirable trait, the driving force that brings us closer to our hopes and dreams, something that compels us—romantically or otherwise. But when it comes to investing, there’s real power in being dispassionate. However, it’s much easier said than done.

Just like the general news media, purveyors of financial information are trading on passion. Journalists know that people are more likely to listen, watch, or read (a real challenge in a world plagued by seven-second attention spans) when there’s something at stake—especially if that something is their money. The axiom holds true: if it bleeds, it leads.

Think about it. Are you more likely to buy a newspaper with a headline that reads, “Everything’s fine” or one screaming “THE END IS NEAR!!”?

Ultimately, though—at least as far as financial reporting goes—99 times out of 100 everything is fine. And even when it’s not, it’s rarely as bad as what the media leads the public to believe. And therein lies the problem: for investors, that media-generated passion often leads to panic.

So, what does the average investor do? They ignore every financial rule in the book including buy low, sell high and that which goes down comes back up. Rather than holding out when things get a bit hairy and prices start to drop, the panicked investor scrambles to get out with the rest of the crowd.

It’s one thing if they’re still working. In that case, they can eventually refuel with funds from future paychecks. Retirees end up facing a much darker scenario. When they make passion-driven plays, there’s a lot more risk involved; they can’t just put back what they’ve let go. But it’s the logistics of their current situation that often creates the issue: the combination of too much time and money on one’s hands quickly leads to less of both. 

So, how do you make it through with your sanity—and your savings—intact? The secret is to actually be a little less passionate in your approach— dispassionate, even. How do you do that? There are a few options. The first is to simply turn off your TV, get offline, or use that newspaper as lining for your birdcage. The second is to become familiar with market cycles, which serve as far more logical—and less fear-driven—indicators of where we are and where the market is heading. And the third is to get someone to do it for you—a bonafide professional with years of experience navigating ups and downs, someone who can be the voice of reason regardless of what the talking heads are saying. While these options certainly provide less of a thrill than today’s twenty-four hour news cycle, I can promise you that all of them are better than falling prey to it.

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Disclaimer

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity.

This blog does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors. It is important to review investment objectives, risk tolerance, liquidity needs, tax consequences and any other considerations before choosing an investment style or manager.

This material contains forward-looking statements, predictions and forecasts (“forward-looking statements”) concerning our beliefs and opinions in respect of the future. Forward-looking statements necessarily involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.

Investing in securities, including investments in mutual funds and ETFs, involves a risk of loss which clients should be prepared to bear, including the risk that the full investment may be lost. There is no guarantee that you will not lose money or that you will meet your investment objectives.

Dividends are not guaranteed and will fluctuate. Dividend yield is one component of performance and should not be the only consideration for an investment. Investment advisory services provided by GW & Wade, LLC 93 Worcester Street, Wellesley, MA 02481.

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