Multi-Unit Franchisee Magazine Issue III, 2017 - Page 86

InvestmentInsights BY CAROL M. SCHLEIF Rewiring Required Debunking 5 investment myths O ur psyches are simply not constructed to make us wise investors. Blame it on our genetics and the survival mechanisms laid down in the most primi- tive parts of our brain. When we’re scared, rather than calmly assess fundamentals, we want to flee (sell) when the more ap- propriate response may well be to buy high-quality goods that are now on sale. What follows are five of the most common misperceptions about money manage- ment we’ve witnessed in our 35-year-long career, accompanied by a more helpful possible response. Myth #1: Every event needs a port- folio or trading response. As noted, we’re hardwired for action; it’s how our species has survived. But in the invest- ment world, action typically means fees, taxes, and other cost drags, which can reduce overall returns. Study after study reaffirms that average investor returns are typically much lower than those gener- ated by standard market indexes, with the difference caused by the cost and timing drag of more frequent decisions versus just getting in and staying put. One recent study showed that the S&P 500 Index generated an annualized return of 8.19 percent versus the average investor return of 4.67 percent. Solution: Write a plan and stick to it, espe- cially when markets are unruly (up or down). Rebalance intentionally when valuations be- come extended and/or market action distorts ranges you’ve established during [Y\[Y\˂^]̎X\][Z[ܚ[[܈ۙH\H^HˈH[KBX]\[\[ۈ[[\ܜ[Z\[\Y[ܘ[\\]\B\YHXYX[Yۘ[][X]\X\B]XZ܈\YY[BX\H[YHXZH[[ [܋[ۙHX\[܈]وHX\] ۈ]\YKX\]H ̌[K[ݚ[š[Y]^\[KX[X[ۈX] \[وH[YKٝ[\\[ݙ\YH[XY[\[&]XYۙH[Y]HH[H\[[Z[[ ]8&\[\ܝ[[Y[X\]HɔL \ۙHوH\ۙ[\Y[ B BUSKUSUSTQHTQHRRK M˜[]HHXY[XۛZX[X]ܜYX[[][ݙ\\YܙHXY[\܂[[Y[[[Y[H\[ KY[H\H[XYH[\Y[\B[ݙ\YK]8&\ٝ[]H[\ۈ\ۘH^H\ \[Z[[B[H[ݙH[H^H[܈[B^H]\^[\XH[[\Y\ž[H[X\[H[YH[\[[X\]Y[^HX\[ۋ][ێ\X]\Y[[܈][[[\H]]X\YHو[\\]˜\H]^H[ ܈YHو[\[X[Z[˜\HX[^Yۈ[ۙ[[Y\\˂]HH\Hܘ\ۈ\H[B[[\8%Z]\[][܂XYX\\\܈[]]HB][و\][[YH[HYY ^]ΈH]\]H[H[˜YܙHHXZHHX\[ۋH[™HH\HHو[ܛX][ۈۈHZ[B\\ˈ\و[ܛX][ۈXY\H[[X\^K]Yܚ^K[\B\Xۚ^XH]\%][[ۙH[܈[^\ HYYXK[[Yܝ[Y\[XY\][[ۋ\Hܙ]\Z[X[]8']\Y8'HX\][ݙHۙH^B܈H\[ٝ[][H^\\H[Bܝ\H[][X\[Xܜ›ZH[\]ZYX\]YY[X[ ܈\H[\܈\][][ۈ[\˜[^H[]YX[X\]Y\܈[\B\]\\˂][ێH^H[][ۜ\]X] B\܈[]YX[X\]Y\\\[X\B]XH[]]Hۙ]\H[X[ \H\][\H܈ݙ\\XY[]]H]š[YHX[H[[H]\OB\XZܚ]Hو]YYH[ܛX][ۂXX^H\\[][\[\X[ B]H][H[^X]H[\ۙ]\B[\Y[[^]X\]][]H\B[YH[\\ˈ\H\HX[HYB\[ܛ\و[[X[\H][š[YXY[\܈\]\ܝHY\[H\[[][ۘ\H[Y\›][[Y]Y܈YX][ۋ]\[Y[ ܈HYHۈ^[Y[ ^K]Y^HX\][\H\X[BۜY\YH\[\^HXYœ\X[[و\][ Z[HX\][\H\[\[وHZ[B[\X[ۜوZ[[ۜوؘ[^Y\˜[[\XX]Z\ۈY[B[[˂][ێH\Hܘ\وX\ۘXB[X][ۈ[]]H\[XK\Y]HX\Y]وۙx&\ۙ]\H[˜[[[YY[\HY]]Z[H][]H\8'\x'H[H[\[ B[][\[HZ\X[ٝ[\\[ܝ[]K^]NX[HY[]YX[܈ۙ\HYX˜\HXYK[H[[ܙ[]H[[[و[YH[[\H\[\X\[˜[ܚ][X][]YX[[\Y[ۙ]\HYY\]H\X]YHۂ]H[و[[\ܸ&\]\ݙ\ۙ\[Y\HZ[[HYX]Y[] ˈۙ˂\[\\وXX\]\\][H]YܚY\K[]YX[X\]Y\][HX]\H]X[ܙH[[X][\][][ۈ[BXXܛ[K]]\X[H^H۸&]X]\\]X ][ێ]HH\Hܘ\ۈ\H[B[[\8%Z]\[][܈XYXœ\\\܈][܈[]]HH][ق\][[YH[H[YY[[B\[\[\\[ˈY[\HX[[BX\Hۙ]\H[\[[X][ۜX\]X[ۋ܈[[[[Y[[\HY]YܚY\]YH[\[˂\KZYѐK\\]HYY[\Y[ٙX\]Xۚ[H[\\[\]ݚY\X[\BX\Y[\[[]Y[X]\[XYX\Y\ˈH[Y\]Y\[ۜ[KBY[]\ ZYXۚ[˘K