While technology and passive investing are potentially beneficial trends for the average investor. It's important to remember how people who seek to take advantage of these trends actually think and behave. With apologies to Jeff Kinney, below are excerpts from the Diary of a Modern Investor who was kind enough to share his personal journal from 2016 with marketpsychinsights.com. It's an inside look at what happens to the best of intentions in a world of increasing access and decreasing attention span.
Diary of a Modern Investor: Diversified and Passive
Dear Investor Diary: I'm really turning over a new leaf this year. No more messing around! I signed up with that online broker. It was so easy. And I got that automated asset allocation model to help generate a diversified portfolio. All it took was 10 questions! Which is great. Because the other sites I looked at had 15 questions. It feels good to know that I'm getting sound financial advice I can trust. And it's way cheaper than traditional financial advice. So psyched!
Dear Investor Diary: I got my statement. It looks like my account value is down about 3 percent so far this year. But the market has been down, so that's not a huge surprise. ETFs are great long-term. Yep. Just leave them alone and let them work their magic. Patience is a virtue!
Dear Investor Diary: Nothing to report. Unless you consider being down $1000 something worth worrying about. And I, for one, certainly do not. (I mean, it's annoying. But that doesn't mean I'm worried.) On CNBC they keep talking about how you need to be in FANG stocks if you want to make money in this market. (I was like, what's that? Investing for vampires! Lol.) All good though. Passive investing is the key because that's where you get to long-term performance. And I'm gonna to be so passive I'm gonna make Gandhi look like he had ADHD!
Dear Investor Diary: Well my portfolio hasn't moved much. Although it IS up half a % point from last month (woot! ;-P). But that's okay. It's always a good idea to be tied to the Index when you have a long-term outlook. Even though Facebook stock is up like 33% so far this year. I CANNOT believe I didn't get in on that earlier! UUUUUUGH! Oh well. You win some, you lose some. I'm not bitter . Still not sure why I need that much in fixed income though. Maybe I should retake that risk questionnaire… have to see if website will let me do that. Diversification may be BOR-ing, but it is key. Pie chart don't lie!!
Dear Investor Diary: Technology sector still booming. And I'm still flat. But I felt better after talking to the guy at the brokerage. Marty I think his name is. He sent me article to read (Note to Self: Remember to do that later!!). He explained to me (again) why we need asset allocation. So it's all good. Even though technically I AM underperforming. Slow and steady wins the race!
Dear Investor Diary: Slow and steady sucks! (lol, j/k!) No. I knew this might happen. Markets fluctuate. Except when they stay exactly the same. Day after day. Like now... My brother in law said that I should consider investing in "developing countries". He said that's the only place where you will get growth that is truly "organic". Have to look into that. Which reminds me, need to make a run to Whole Foods later! Place is awesome. Wonder how their stock is doing…
Dear Investor Diary: Okay. So FANG stocks are apparently the way to go. Facebook is still killing it. (Which I completely predicted). And Amazon is up like a jillion percent. Exactly WHY am I not getting more exposure to them again?? Seriously, I'd be up like 50% for the year (smh). That's like 5 years worth of returns according to their models. Heard someone on CNBC say that now is the worst possible time to be in bonds. Like, ever. Made a lot of sense. Getting tired of this.
Dear Investor Diary: That does it! This model is wack. If I had trusted my instincts in the first place I'd be light years ahead of the game. (For reals!!) Time to recognize that paradigms shift in this world and you have to shift with them. Invest in something that actually HAS A FUTURE. Moving to cash for now and will put it back to work after Hillary! wins the election. Things will settle down then.
(Visit marketpsychinsights.com for applied behavioral finance tools for today's financial advisor.)
"And hey… let's be careful out there."
Frank Murtha, Ph.D.