It is amazing how predictably irrational we humans can be! Our brains are subconsciously seeking certainty, especially as things become more uncertain.
The only changes to make to your investment portfolio should be in connection with your plan. Jumping to rebalance portfolios now may damage your long-term plan.
Beware of the people that predict the future, especially those profiting from clicks, shares, or advertising. Panics bring out the worst in humanity and we are already hearing about scams targeting those that are anxious about the virus. Don’t buy something online that can cure the virus – if that was the case, we wouldn’t be in this situation in the first place!
Market forecasts are not much more than entertainment and heeding such advice can do more harm than good. Today is no exception to that truth. We may be tempted to abandon our plan and let allow “expert” forecasts to guide our decisions.
Last week, Goldman Sachs came out with a negative outlook, expecting the market to drop even more. This type of announcement, especially after high volatility and market losses, can influence investors to run to the sideline for safety (aka raise cash, lighten up on stocks). But we just don’t know what will happen. At times like these, putting things in perspective is essential.
Do you know what Goldman said just two months ago? They were “moderately pro-risk…with an overweight in equities and an underweight in bonds.” They also said, “sharp increases in oil prices might weigh on risk appetite.” Yes, this is completely laughable. You will say, “Hey, that’s not fair, no one can predict that stuff.” To which my response is, “EXACTLY!”
The issue is not that investment banks can’t predict this stuff. The issue is that they pretend they can. And what’s worse is the non-experts repeating phrases to get the maximum attention.
As always, we are here to discuss any concerns or questions our clients have. We hope that this helps you sift through all the noise and maintain perspective. If you have friends that you believe could benefit from such sanity, we invite you to pass this along to them.
©2020 The Behavioral Finance Network. Used with permission.