This Week’s Blogger: Scott D. Heins, CFP®, IAG Chief Investment Officer
I had an interesting experience driving my daughter home from camp on Sunday.
We were driving through a small town in central Wisconsin when a vehicle made a right turn at an intersection a block or so in front of us. Everything seemed normal.
However, the car did not accelerate very quickly. Within 30 seconds we were only a couple of car lengths behind it. Then it got interesting.
The driver quickly applied their brakes so we both came to a crawl. He then accelerated a bit, but slammed the brakes and came to a complete stop in the middle of the road. He then hoisted an unkind hand gesture toward us while staring in his rearview mirror and yelling very loudly. Very bizarre.
This little dance repeated itself two more times as we drove through town, with me progressively increasing my distance between our vehicles. Eventually, he turned left and we parted ways.
We have two choices when we are impacted by other peoples’ irrational behavior. We can either engage with them or ignore them.
If I was less stoic in nature, my emotional reaction to being brake checked multiple times would have driven my actions. I wanted to pass this jerk and leave him in my dust. That would have given him precisely the reaction he was seeking. It also would have increased the potential for negative outcomes for me and my daughter.
When you permit other people to hijack your behavior through your emotions, you generally end up losing either your dignity or your money. While your response may feel like the right thing to do at the time, a thoughtful review of the instant replay typically leads to that call being overturned.
The financial markets can sometimes act like this aggressive driver. Traders can brake check you, speed, hoist, swerve unexpectedly, and even drive the wrong way on the road. Unfortunately, their irrational behavior does not last for a few minutes; it tends to go in streaks that can last for months or even years.
As investors, we understand that when we invest in the financial markets for higher potential returns there will occasionally be bouts of irrational behavior. When they occur we have the choice of engaging with or ignoring irrational markets.
Our consistently stoic (and perhaps even relatively boring) advice is to stick with your logical long-term financial plan to avoid being emotionally hijacked by irrational people.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through IAG Wealth Partners, LLC, (IAG) a registered investment advisor and separate entity from LPL Financial.
Any opinions are those of IAG and not necessarily those of LPL Financial. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
Quote of the week:
Charlie Munger: “A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw irrational emotion under control.”
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