July 2nd, 2018 | Advisor Magazine
Advisor Magazine Features Excerpts from Gregg Fisher on Behavioral Investing
FDR’s famous pronouncement that “The only thing we have to fear is fear itself” applies equally to investing, wrote Gregg S. Fisher, Gerstein Fisher Founder, Portfolio Manager, and Head of Research, in his chapter-long contribution to a 2014 book called Investor Behavior: The Psychology of Financial Planning and Investing.
Now, the July 2, 2018, issue of Advisor Magazine, an on-line publication, includes excerpts from Gregg’s chapter, in an article titled “Advising the Behavioral Investor….” The excerpts focus on the damage that investors’ cognitive and emotional biases can do to returns: why overcoming them “is…vital to individuals’ long-term wealth creation.” One of the most important services that a financial advisor can offer to his or her clients, says Gregg, is helping to ensure that in times of market turbulence,”reason, discipline, and objectivity triumph over emotions such as fear, greed, and regret.”
The excerpts also guide readers to information in the full chapter on:
- How risk and return are related;
- How to measure the equity risk premium over cash equivalents;
- Why investors so often underperform their asset-class benchmarks; and
- How “to turn predictable, common investor biases into profit opportunities.”
The article ends with a discussion of the tension between what investors know intellectually and what they feel—especially when markets are plunging. “While most investors understand the concept of market cycles,” Gregg writes, “when the economy has been stuck in a trough for an extended period they often have difficulty believing that stock markets will eventually recover.” Indeed, panicking in a tough phase of the market cycle is one of the greatest dangers that investors face.