info@pinnacle-mgmt.com Client Login Home Services Events Resources About Us Contact INVESTMENT READ TIME: 3 MIN Don’t Be Your Own Worst Enemy One of the most well-known investors of the 20th Century, Benjamin Graham, said that “the investor’s chief problem—and even his worst enemy—is likely to be himself.”1 What Graham understood—and modern research is catching up to—is the idea that we all have emotions and biases that affect our decision-making. The innate wiring built to survive pre-modern times can be counterproductive in our modern world, especially when it comes to investing. Let’s take a quick look at a few of the human emotions and biases that can adversely impact sound investment decision-making. Fear and Greed — These are the two most powerful emotions that move investors and investment markets. Each emotion clouds our capability for rational and dispassionate decision-making. They are the emotions that lead us to believe that prices may continue to rise (think the Tulip price bubble of 1636) or that everything has gone so wrong that prices may not recover (think Credit Crisis of 2008-2009). Some investors have found a way to conquer these emotions, be brave when everyone else is fearful, and resist the temptations of a too-exuberant market. Overconfidence — Peter Bernstein, a noted economic historian, argued that the riskiest moment may be when we feel that we are right.2 It is at that precise moment that we tend to disregard all information that may conflict with our beliefs, setting ourselves up for investment surprise. Selective Memory — Human nature is such that we tend to recast history in the manner that emphasizes our successes and downplays our failures. As a result, we may not benefit from the valuable lessons failure can teach. Indeed, failure may be your most valuable asset. Prediction Fallacy — Humans have an innate desire to recognize patterns and apply these patterns to predicting the future. We erroneously believe that because “A” occurred and “B” happened that if “A” happens again, we can profit by anticipating that “B” will repeat. Market history is littered with examples of “rules of thumb” that have worked, until they no longer worked. Financial markets are complex and unpredictable. Our endeavors to tap their opportunities to pursue our financial goals are best realized when we don’t burden the enterprise by blindness to the inherent behavioral obstacles we all share. 1. Quoteswise.com, 2021 2. Morningstar.in, 2020 The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2021 FMG Suite. Share | Related Content Investments You’ve made investments your whole life. Work with us to help make the most of them. Global vs. International: What’s The Difference? International funds invest in non-U.S. markets, while global funds may invest in U.S. stocks alongside non-U.S. stocks. 5 Smart Investing Strategies Getting what you want out of your money may require the right game plan. Download Our Free App We've built a handy mobile app that allows you to ask us questions on-the-go and to receive helpful notifications from us. Check the background of your financial professional on FINRA's BrokerCheck. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. We take protecting your data and privacy very seriously. As of January 1, 2020 the California Consumer Privacy Act (CCPA) suggests the following link as an extra measure to safeguard your data: Do not sell my personal information. 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