The stock market goes up and down, but why do some people continue to lose money? Behavior and emotion when it comes to investing can ultimately take a toll on our portfolios. Joe and Al discuss this in detail, covering four emotional investment mistakes:
1. Market Watching
2. Bailing Out Adult Children
3. Financial Literacy
4. No Road Map
Plus, Allison Alley, CFP® joins Joe Anderson to discuss how to take emotion out of investing.
Important Points:
0:10 “Since the beginning of the stock market, we’ve invested. The stock market goes up, the stock market goes down and then it reaches new highs.”
0:29 “We know that this happens but why do we continue to lose money in the market? It’s your behavior, your emotions when it comes to your money…”
1:24 “When you look at investment returns, unfortunately investors do not achieve the appropriate return that the investment is giving us. Why is that? It’s because we buy and sell at the wrong time.”
1:59 “You could have the best portfolio in the world, but one simple mistake will blow out all of that return because of our emotion.”
3:05 “When you watch the market too often, you make trades too often and we’re going to talk about what that does to your portfolio.”
4:36 “The more often you trade, the worse off your return [is].”
7:03 “Investing and entertainment can intertwine, but it’s not a good idea to get entertainment from your investments.”
8:22 “Certain types of investments are more expensive than others.”
8:52 “If you control those three things – risk, taxes and fees – you will have a better investment experience.”
12:23 “How do I leave money to my kids without them paying taxes?”
12:51 “Any asset that is held outside of a retirement account has a step-up in tax basis.”
13:41 “If your estate is under about $5.5 million, there is no estate tax for the kids and if you’re married you can double that up. But, when the kids get your IRAs and 401(k)s, they will have to pay taxes just like you would have.”
15:17 “Focus on doing your best to take the emotion out of it…it’s about being patient and not having those knee-jerk reactions to the daily fluctuations of the market.”
16:01 “It comes down to creating a plan, implementing it and then sticking to it.”
16:47 “Because there is no perfect investment, that’s why you really need to focus on what your goals are.”
18:12 “It’s about trying to take that emotional aspect out of the whole situation. Get a plan and stick to it so you have the best chance possible of achieving those goals.”
20:26 “Financial literacy is a big problem for those coming into retirement. There’s a lot of misinformation and people are making a lot of poor emotional decisions.”
20:42 “Is the stock of a single company usually safer than a mutual fund?”
20:50 “The best investment that anyone can ever possibly make is an investment in one individual stock. The worst possible mistake anyone can ever possibly make is an investment in one individual stock. That’s why diversification is the only free lunch.”
25:40 “Be careful of where you’re pulling your money out…make sure you have a plan in place.”
