The Diamondback and Market Emotions

Kings Island recently unveiled its new roller coaster, the Diamondback. Although I have yet to make it to the park for a ride, I did take a virtual spin via their website. It looks like a real stomach-churner, and it reminded me of something else that has been a source of nausea for most of us recently.
–Yes, I’m referring to the markets.

I’m reminded of a chart, The Cycle of Market Emotions. Many of us would agree that this ebb and flow pretty accurately describes the roller coaster of emotions that we have been feeling over the past year. Through my dealings with clients, I find it interesting that we all rest at different stages on the continuum at different times. While one might be feeling desperately panicked and want to sell every share of every fund they own, another could have already crossed this emotional ditch and be optimistically eager to buy shares at a bargain.

It might come as a surprise to some, but one of the most valuable services that we provide to our clients is to save them from themselves. In this age of 24-hour media, breaking news, and every form of talking head financial ‘expert’ on any station, it is easy for one to make a decision out of panic and do permanent damage to their long term investment success. With our guidance and disciplined investment philosophy, we help our clients achieve their goals and avoid these self-destructive behaviors.

It has been said that “the love of money is the root of all evil.” Maybe that’s why the average mutual fund investor doesn’t even come close to realizing the return of the average stock mutual fund.
-Because his emotions got in the way.

By Amanda Bashore