The Investor’s Enemy

Why is investing such hard work?

Photo: Alvimann. Source: Morguefile

Investing should be simple: spend less than you earn, and sock away the extra. But we have a host of habits that get in the way. First there’s the lure of excess spending. Our lifestyles are determined more by our peer-group rather than our 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: complex annuities, high-fee mutual funds, and so on. These con games are designed to turn our hard-earned savings into someone else’s income. Finally there’s contagion: we tend to chase performance and get sucked into markets just as they’re on their last legs, then panic and bail out at the bottom. We’re tempted to cycle between fear and greed at just the wrong time.

When it comes to investing, emotions are the enemy. Different 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. We like to be with other people, and when a crowd is running in one direction, it’s hard to go the opposite way, or even just stand still. But euphoria is the enemy of reason, and financial performance is a coldly rational business.

Source: Wikipedia

Warren Buffett says to be greedy when others are fearful and fearful when they’re greedy, but I’d settle for being emotionally stable. Neutrality is often the best policy.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2017-07-17T12:22:05+00:00 April 19th, 2016|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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