Mitch Tuchman: Money is very emotional and there’s a study done by a firm called DALBAR and even Vanguard that says that emotions cost investors half their returns on a long-term basis.
Investors tend to sell at exactly the wrong time and buy at exactly the wrong time and there’s an abundance of evidence for this. But why is it so emotional? After all, money is just dirty green pieces of paper or digits on the screen.
But money is not that for most of us. Like for me, money represents freedom. Having money allows me to be free to do things that I want to do in my life and freedom is very important to me. For my 82-year-old mother, money is about security, just knowing she doesn’t have to worry. Money is an emotional experience for people.
At Rebalance, we have a great appreciation for that and try to get to the bottom of that for every client for one reason, and that is when markets start tanking, it’s the emotions that kick in and have people start to make the bad decisions that get them off track. We’re here to make sure they stay the course and don’t make those bad decisions.
So understanding people’s emotions, understanding and appreciating and respecting and honoring the emotions that are involved for every one of our clients is a key part of our approach because when those times come, we need to intervene and make sure that our clients stay the path.