The Investor’s Dilemma

Why is investing so hard?

Investing should be simple: spend less than you earn, and sock away the extra. But we get in our own way. First there’s the lure of excess spending. People’s lifestyles are determined more by their peer-group rather than their financial goals. That’s why young athletes with seven-figure incomes end up bankrupt just a few years later. Then there’s predatory financial products: lottery tickets, overly-complex structures, high-fee mutual funds. These confidence games are designed to turn your savings into someone else’s income. Finally there’s contagion: we like to chase performance and get sucked into markets just as they top out. So we cycle between fear and greed at just the wrong time.

When it comes to investing, our emotions are our worst enemy. Investment strategies fall in and out of favor. The time to buy straw hats is in February, but people rarely do. It’s hard to look past the snow and the cold and realize that summer will come again with its heat and humidity. People like to be with other people, and when the crowd is headed one way, it’s hard to go in the opposite direction, or even stand still. But euphoria is the enemy of reason, and financial performance is a coldly rational business.

Great investors say to be greedy when people are fearful and fearful when they’re greedy, but I’d settle for being emotionally stable. Neutrality can be the best policy.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2014-04-30T10:17:48+00:00 April 30th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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