How might it affect you?

“It turns out my job was not to find great investments but to help create great investors,”
writes Carl Richards, author of “The Behavior Gap.” From increasing our budget mindfulness to
taking a steadier approach to investing, Richards has drawn attention to how our unexamined
behaviors and emotions can be to our detriment when it comes to living a happy and financially
sound life. In many cases, we make poor financial decisions when experiencing panic or anxiety
due to personal or widespread events. 

The Behavior Gap Explained. Coined by Richards, “the behavior gap” refers to the difference
between a wise financial decision versus what we decide to do. Many people miss out on higher
returns because of emotionally driven decisions, creating a behavior gap between their lower
returns and what they could have earned.

Excitement When Stocks Are High. Whether in a bull market or witnessing the hype from a
product release, many investors may feel tempted to increase their risks or attempt to gain
from emerging investments when stocks are high. This can lead to investors constantly
readjusting their portfolios as the market experiences upswings.

Fear When Stocks Are Low. In response to market volatility, investors may feel the need to
choose more secure investments and avoid uncertain or seemingly unsafe investments. When
stocks are low, a typical response may be to sell and effectively miss out on potential long-term
gains.

Short-Term Anxiety and Focus. As humans, viewing aspects of our lives through the lenses of
current circumstances is normal. However, one emotional response to any event is letting the
moment consume us. Many may find it difficult to think long-term and remember. However,
making a rash decision can inhibit the long-term benefit of maintaining a balanced perspective
without reactionary behavior.

The market can go up or down at any given point, or it can remain the same. One thing we can
control is how we handle our financial strategy. Remembering the likelihood of recovery over
time — and the market’s nearly inevitable up-and-down movement — can provide a more
logical angle to calm the nerves.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations

1. BehaviorGap.com, May 16, 2022