December 4, 2016

Examples of the Narrative Fallacy

sad dog

To illustrate this principle, I analyzed a week’s worth of “Morning and Midday Market Views” provided by the Schwab Center for Financial Research.

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The Narrative Fallacy

reading upside down

No one would click on the headline, “Stocks went up today and we have no clue why.”

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Recouping Losses Is Not As Hard As You Think

Deceptive Posts About The Difficulty Of Recouping Losses

Many advisors and most investors don’t really understand the math on how to compute investment returns.

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Changing Your Financial Behavior Is Difficult

Financial Behavior Modification Is A Difficult Process

Our minds are wired to quickly generalize on perceived trends and react to them.

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One Powerful Method To Achieve Higher Investment Returns

One Powerful Method To Achieve Higher Investment Returns

Long-term investing does not require making quick emotional responses.

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You Want An Advisor Who Keeps You From “The Big Mistake”

You Want An Advisor Who Keeps You From "The Big Mistake"

Real financial advisors stand between you and the Big Mistake of buying high and selling low.

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Write Down Your Investment Plan

Write Down Your Investment Plan

To protect yourself from behavioral errors, write down your investment plan.

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Inflation Illustrated

stamp pile

We tracked the price of a first class stamp over the last 130 years, noting the changes, to show the steady erosion in buying power during that time.

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Dimensional On: Staying in the Market

Dimensional On: Why Should We Invest Internationally?

“It is always a difficult experience for investors to stay in markets.”

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Investing Mistake: Forgetting About Inflation

Investing Mistake: Forgetting About Inflation

Taking inflation into account changes nearly everything about financial planning.

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Investors Want Non-Correlated Assets Until They Experience Non-Correlation

Investors Want Non-Correlated Assets Until They Experience Non-Correlation

While many investors say they want a low-correlation portfolio, they don’t want to actually experience a low-correlation portfolio.

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Is There A Christmas Rally In the Markets?

Is There A Christmas Rally In the Markets?

While Santa Claus usually brings something positive for the markets, it isn’t enough to worry about jumping in and out of your investments.

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Don’t Mistake Volatility For Loss

Don't Mistake Volatility For Loss

“Nothing has provided greater risk control over the long term than equities, which are historically without principal risk over 30-year periods…”

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What Games Can’t Teach You About Investing

What Games Can't Teach You About Investing

Many people are first exposed to investing in grade school through a very simple game. Unfortunately, this game teaches all the wrong lessons.

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How to Help Clients Cope With Scary Markets

How to Help Clients Cope With Scary Markets

Staying the course when an index investment is down is very uncomfortable in the short-term but usually the best course of action in the long run.

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Do The Opposite of Wall Street Consensus?

Do The Opposite of Wall Street Consensus?

Contrarian indicators have paid off historically.

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The Crowd Is Usually Wrong

The Crowd Is Usually Wrong

Stocks less frequently traded have better returns.

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Nobel Prize Worthy Advice On Investing

Nobel Prize Worthy Advice On Investing

Here’s how a good advisor should respond when you call about losses in your account.

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Does Past Performance Have Anything To Do With Future Results?

Does Past Performance Have Anything To Do With Future Results?

Is there a correlation which would justify talking about “the momentum of the markets”?

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Guess What Statistic Has The Highest Correlation With The S&P 500?

Guess What Statistic Has The Highest Correlation With The S&P 500?

David Leinweber calls this technique, “torturing the data until it screams.”

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What Investors Really Want

What Investors Want

“In reflecting on our experiences as advisers and investors, we’ve come up with what we believe are the key and often unspoken wants and needs of our investors.”

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Mailbox: Which States Allow Prize-Linked Savings Accounts?

The Drive of the Lottery

There are thirteen states so far. Does your state allow them?

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Bogle’s Best Advice: Don’t Peek

Don't Peek

When it comes to finances, just shut your eyes and keep them closed.

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If You Wouldn’t Buy It, Why Keep It?

Lego Shop

The stock market is one of the few places that when things go on sale we are less likely to want to buy.

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Advisors Focus On Panic Prevention In Volatile Market

Panic Button

Our brains are not wired well for handling the fluctuations in the stock market. Could a financial advisor help?

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Driving Emotions From Your Investment Process: A 12-Step Program

Brain Scan

Don’t let short term volatility ruin a brilliant long term investment strategy.

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Don’t Do Something. Just Stand There!

Sisters Forever

You learn a lot by the discipline of reading old news.

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How To Save Wealthy Clients From Themselves

Brain Scan

“Emotion can undo the best-laid financial plans.”

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Advisors Must Stop Client Self-Destruction

Koala Bear

Sometimes the best advice is when a competent advisor tells you that you are wrong.

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Active Management Has An 82% Failure Rate

Active management failure

Managing investment assets requires managing investor expectations.

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Is A Financial Apocalypse Coming?

The Disaster Diaries by Sam Sheridan

Should you buy as much gold as you can get your hands on?

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The Blank Slate by Stephen Pinker

The Blank Slate by Stephen Pinker

Although it would be wonderful if we lived in a world that lived up to the ideals of the Utopian Vision, we believe along with Stephen Pinker that reality supports the Tragic Vision.

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The Driver of Future Behavior

Brain Scan

Investments consistently outperform investors.

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Thou Shalt Not Covet Thy Neighbor’s Tesla

tesla_t

Since it is inevitable that each group of friends will represent a spectrum of financial capacity, healthy relationships require that all be prepared to manage these pressures.

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The Optimist’s Antidote

RIP best ideas

Behavioral psychology research suggests that you should send your best ideas to the grave.

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Improve Your Financial Decisions (Book Review)

lazy brain_t

Behavioral psychology is uncovering many common mental lapses and offers new ideas for improving decision making in light of these heuristics.

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The 24/7 Financial News Media Machine

Financial Noise

“Here are a few of the things we’re worried about – and the ways in which our firm is preparing for them.”

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Recent Market Advances Fail to Overcome Mental Accounting

satisfactionsanp500_t

The S&P 500 has nearly doubled in the last four years. Yet many investors are left feeling more disillusioned with their investments than ever before. Some of this discontent can be combated by understanding the psychological effects of market volatility.

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Making Peace with your Money Past

money peace

Money plays such a personal role in our lives that most people learn early on to keep their financial affairs a secret. These shadows promote many different varieties of financial pathologies and distress.

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The Smart Money Philosophy of Doug Lennick

Roulette Wheel

Follow a philosophy so that there is always a smart place to get money

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Financially Savvy Kittens on the Definition of Success

BottomMeasurement_t

This kitten measures success from the bottom not the top. Be more like this kitten.

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Marshmallows and Investing?

marshmellows_t

Parents take note: Research on delayed gratification shows connections from children through adulthood.

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How are foreign stocks doing compared to stocks in the United States? Fall 2012

The United States of America

Sometimes the medium term trend seems to weigh more heavily in our minds than the long or short term trends.

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Suddenly Wealthy

Windfall

Studies show that onetime windfalls can actually impoverish you. They make you feel rich, which inevitably leads to overspending. But wealth is what you save, not what you spend.

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A grown-up discussion on income and wealth inequality in America

Girl with tongue

Most work toward equality of results impoverishes everyone.

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Stress Is Not Your Enemy

Cat On Mailbox

How often do you intentionally push yourself to discomfort? Do you think the best retirement is relaxing and recreating? Think again.

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Video: The Benefits of Having a Financial Advisor

David Marotta Video Green Background

If you want to get in shape and need push in the right direction, you hire a personal trainer. If you want advice and a push in the right direction to be in good financial shape, hire a financial advisor.

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Women are more afraid of becoming “bag ladies” than men

Bag Lady

Women are more afraid of becoming “bag ladies” than men, and it makes them approach investing and saving for retirement differently, assuming they have managed to tackle either of those chores.

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Countering Resistance

Castle With Moat

Client resistance is an inevitable part of the financial planning process. It’s a sign the advisor is doing his or her job.

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Radio: Grow Rich Slowly: The Four Secrets of an Automatic Millionaire

Marotta on the Radio

Listen to David John Marotta’s interview on growing rich slowly: the four secrets of an automatic millionaire

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