Your Emotions and the Stock Market

A critical element in successful investing is “how you react to feelings of both discomfort during the market’s fear cycle and invincibility when markets are booming,” writes Marty Leclerc earlier this month for Forbes. During periods when share prices drop, he says, data shows that most investors want to end the discomfort, which is the “root cause of poor investment results.” Leclerc explains why investors react so intensely to market shifts: Our brains are hard-wired to avoid pain at all costs, which is why investors who rarely look at their portfolios “do significantly better than those who do frequent reviews.” […]

Remember Ritholtz’s Advice During Next Market Sell-Off

“Something bad happens somewhere, and markets are unhinged. Once the noise subsides and the markets settles down, everyone wonders what the heck just happened,” writes Barry Ritholtz, chief investment officer of Ritholtz Wealth Management and columnist for The Washington Post. He references the Brexit vote and why it, or other macro events, shouldn’t affect your investment plan. Ritholtz points out that “markets have on average swung 2 percent up or down once every 11 days since the year 2000”. Therefore, he asserts, the volatility in the wake of the Brexit vote should have come as no surprise. The columnist outlines […]

The Wall Street Journal’s Zweig Addresses Market Volatility

Investors often perceive the stock market as more volatile than it is, according to the latest newsletter from Matarin Capital Management (which oversees approximately $700 million in assets). In a Wall Street Journal blog post from earlier this year, Jason Zweig describes the stark contrast between the S&P 500’s daily movement within the previous 12-month period compared to its quarterly or annual shifts. In the newsletter, Stuart Kaye and his partners at Connecticut-based Matarin write, “Because volatility spikes are a shorter-term phenomenon, they heighten investor awareness and attention on a short-term basis.” This information “overload”, they explain, leads investors to […]

Volatility and Investor Behavior in Today’s Uncertain Market

The PBS Newshour reports on recent market volatility, noting a series of contributing events. Liz Ann Sonders of Charles Schwab said, “a lot of [the current volatility] really is unfisnished business from 2015, it’s just conspired to occur in a condensed period of time, unfortunately at the beginning of the year, which I think adds to the angst of investors.” She also noted, “we do not think this is the beginning of a big nasty bear market, but it could get worse before it gets better.” Further, she opined that the financial crisis, coming within a decade of the prior […]

Investors face a “New Operating Regime,” El-Erian Says

Mohamed El-Erian, chief economic advisor of Allianz SE and chairman of President Obama’s Global Development Council, says “[f]inancial markets are now transitioning . . . to a new operating regime.” He contends that this means “volatility bouts will be more frequent and, in some cases, more violent than in the last few years.” Further, he suggests that that “challenge will be in monitoring carefully the tipping points for various market segments, along with related price overshoots and undue asset-class contagion.” El-Erian points to nine aspects of the change: “Bouts of volatility are to be expected;” They will be “amplified by […]