Behavioral Biases (Part II)

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Let’s continue our alphabetic tour of common behavioral biases that distract otherwise rational investors from making best choices about their wealth. There are so many investment-impacting behavioral biases, we could probably identify at least one for nearly every letter in the alphabet. As Warren Buffett has famously said, “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful ...

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Are You Prepared for the Next Market Correction?

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If you enjoy a good read, we recommend Warren Buffett’s annual Berkshire Hathaway shareholder letters, dating back to 1965. While financial reports are rarely the stuff from which dreams are made, Buffett’s way with words never ceases to impress. His most recent 2016 letter was no exception, including this powerful insight about market downturns:

“During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves ...

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Survivorship Bias

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As the famous quote by Prime Minister Benjamin Disraeli states:  “There are three kinds of lies – lies, damned lies, and statistics”. In this installment of Financial TIPs we will focus on the third type of “lie”, statistics. One trick of the trade we must watch for when accepting or rejecting a performance analysis is survivorship bias; using statistics to mislead.

What Is Survivorship Bias?

Only the strong survive. This is a familiar adage because it’s often true ...

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Our Relationship with Investment Risk

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Is investing riskier than usual these days? In our experience, probably not. It just feels that way because of the constant bombardment of information. If there is such a thing as “normal” in this world of ours, risk is certainly built into the definition.

In Morningstar’s Quarterly Economic Commentary, Francisco Torralba, Ph.D., CFA described the [f]inancial markets as having lived in a heightened state of alert for the last two years. Markets had a boomerang first quarter. Quick ...

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Financial TIPs on Shredding

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On a monthly basis we are often inundated with mail regarding our personal finances. Whether its credit card statements, bank statements, investment holdings or tax records before we know it our file cabinet is filled with paperwork. A question I am often asked is: How long should we retain all these statements? When it comes to personal document retention guidelines, there are some general rules that you may want to consider when deciding to retain or discard ...

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Doing the Due Diligence on Your Financial Advisor – Part 1: How do You Know?

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It’s time to address a challenging subject: In selecting or retaining a financial advisor, how do you know if you’re making a wise choice?

It’s a challenging subject for us and one that we take very seriously as we develop and expand on our firm’s own best practices. We believe it is even more challenging for investors. First, the stakes are high. The quality of the selection, or lack thereof, can literally make or break your family’s fortune. ...

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Forest for the Trees – Strategy #3: Controlling Costs

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This is the third installment of our favorite “key” investment strategies series. In the first two we covered the importance of staying invested to earn market returns, while managing the risks involved. We’ll conclude with what may be the most obvious and powerful advice of all, even if it does not seem to receive the attention it deserves.

    1. Being present
    2. Managing for market risks
    3. Controlling costs

 Strategy #3: Controlling Costs

 

Don’t spend more than you need to.

Why do ...

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Forest for the Trees – Strategy #2: Manage Market Risks

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In our last Financial TIP, we described why most investors should ignore the never-ending onslaught of unpredictable financial news and focus on three strategies that can be much more readily managed. At least once you know they are there these potent strategies include:

  1. Being present
  2. Managing for market risks
  3. Controlling costs

 Strategy #2: Managing for Market Risks

 

Why take on more risk than you need.

There is no getting around the fact that the market does not deliver rewarding ...

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Forest for the Trees – Investment Strategy #1: Being Present

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We have all heard the idiom that someone “can’t see the forest for the trees”. This means that they are so involved with the details of a situation that they lose sight of the larger issue. This idiom also applies to investment strategies. Let me explain; if you have ever created a power point slide you understand that white space is just as important as the printed word. When viewing an illustration, we typically pay the most ...

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Financial Check-up

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I am turning 50 this year and my doctor informed me it was time for that checkup…

What if I asked the question: Have you had a financial check-up lately? How many individuals would even know what I am talking about, or how to begin?

Your financial check-up should include the following 5 questions:

    1. Have you prepared {updated} a financial plan
    2. Do you know your risk tolerance score
    3. When was the last time you reviewed your investments
    4. Have you ...
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