Wealth Management Clients Retirement Plans Health and Welfare
Library Resources About Us Contact Us

Wealth Management

Structured Asset Approach

PATIENCE AND DISCIPLINE

Behavioral Finance
Daniel Kahneman, Princeton
Nobel Prize in Economics, 2002

  • Applies scientific research on human and social cognitive and emotional biases to better understand economic decisions and how they affect market prices, investment returns, allocation of resources
  • Concerned with the economic rationality/irrationality of human psychology. The more emotional an event, the less sensible people are

Structured Investing Approach

Stay focused on the long term
  • Lack of discipline, emotion and trying to time the market can affect your long-term investing success
  • Make sure you are guided by an investment policy
Regularly review your portfolio
  • Make adjustments depending on changes in your life
  • Rebalance periodically to keep your portfolio aligned with your goals
Don’t go it alone
  • An independent Financial Advisor can help you stay on track and focused on your long-term goals

The Cycle of Market Emotions

Emotion often leads to trying to time markets

Picture - The Cycle of Market Emotions

“Time in” vs. “Timing” the Market

Performance of the S&P 500 Index 1970 - 2009

Chart - Performance of the S&P 500 Index 1970 - 2009

Performance data for January 1970-August 2009 provided by CRSP; performance data for September 2009-December 2008 provided by Bloomberg. The S&P data are provided by Standard & Poor’s Index Services Group. CRSP data provided by the Center for Research in Security Prices, University of Chicago. US bonds and bills data © Stocks, Bonds, Bills, and Inflation Yearbook™, Ibbotson Associates, Chicago (annually updated work by Roger G. Ibbotson and Rex A. Sinquefield). Indexes are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results. Values change frequently and past performance may not be repeated. There is always the risk that an investor may lose money.

Stay the Course

Average Investor vs. Major Indices 1989 - 2009

Chart - Average Investor vs. Major Indices 1989 - 2009

Average stock investor and average bond investor performances were used from a DALBAR study, Quantitative Analysis of Investor Behavior (QAIB), 03/2010. QAIB calculates investor returns as the change in assets after excluding sales, redemptions, and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses, and any other costs. After calculating investor returns in dollar terms (above), two percentages are calculated: Total investor return rate for the period and annualized investor return rate. Total return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions, and exchanges for the period. The fact that buy-and-hold has been a successful strategy in the past does not guarantee that it will continue to be successful in the future.

TOP OF PAGE