“Here’s an interesting fact – Did you know that a during a penalty kick in soccer, the goal keeper has the best chance of stopping the shot by staying still and not diving left or right? It’s true – there are studies to prove it. The keeper has a 33% chance of stopping the shot if they stay in the center of the goal, a 14% chance if they move the left, and 13% if diving to the right. Interesting, because goalies only stand still 6% of the time.
That may be because of psychological term called “Norm Theory.” Since the norm is for the goalie to move right or left, Norm Theory implies that goalkeepers tend to have worse feelings when they are scored on and they didn’t do anything (meaning they stayed in the center), as opposed to when they did something (meaning they moved right or left). This leads to a bias for action, or for “doing something”.
Okay – Now let’s apply this concept to investing. It’s hard to do nothing. This is especially true with the constant bombardment of news and data that come at us from every direction. Investors hear things in the media or from friends and colleagues, and want to make changes in their portfolios based on all the chatter.
However, like in soccer, the best thing when investing is to have a strategic long-term plan based on your lifestyle and needs, and do nothing even when you feel like you need to do something. It’s hard, I know, but don’t kid yourself that you always have to make a change.
Chances are not making an investment change may be the smartest thing to do of all your options.
A good test is to see how much emotional reaction you have to the next market correction. If you feel an overwhelming need to do something the next time the markets correct 5, 10 or even 20%, maybe you have less tolerance for risk than you originally thought when you created your portfolio.
If that’s the case, call us or visit our website. We can help assess your tolerance for risk through a concise online test that quantifies your risk tolerance in a new, fun, and intriguing way built on decades of academic research and a scientific framework that won the Nobel Prize for Economics.”
Important Disclosure Information for “It Can Be Hard To Do Nothing”
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Wealth Management), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. All indexes referenced are unmanaged and cannot be invested into directly. The economic forecasts set forth may not develop as predicted. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument Wealth Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Monument Wealth Management is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Monument Wealth Management’s current written disclosure statement discussing our advisory services and fees is available for review upon request.