MINT HILL, NC – If you happened to catch last week’s edition of the paper, this is a continuation. If not, I’m sure you’ll still find this interesting. Below, we continue to look at investor behaviors and the negative effects they can have.
Regret: What investor wouldn’t regret making an investment decision that did not go as expected? Unfortunately, this is part of investing. However, some investors allow this regret to alter their investing behaviors. Sticking to your investment strategy helps avoid either error.
Mental Accounting: Asset allocation and diversification can help to balance a portfolio’s performance. Mental accounting is when an investor compartmentalizes investments and ignores the portfolio as a whole. Such a narrow perspective could lead an investor to overlook various asset classes.
Hot-Hand Fallacy: Investing certainly would be easier if there were patterns and trends to follow. Some investors may see a pattern where none exists and take action based on this perception. Investors may want to chase the “hot” returns assuming they will remain positive or even select a “hot” manager who happened to have a good year.
This article was written by Voya for use by your local Cambridge Investment Research Financial Advisor.
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