We often hear advisors say "Don't chase returns." But what does that really mean? Today, Alex Cabot and Ed Lambert of Birch Run Financial explain, and why this advice is so important.
Chasing Returns is really about FOMO, or "keeping up with the Joneses." Psychologically, we hear about a hot stock or other item, and we don't want to miss out. We've seen this with tech, commodities, even real estate. The problem is, these items can be artificially inflated, and that bubble will eventually burst. Advisors will always say "buy low and sell high." Chasing these "hot" items means you're doing exactly the opposite.
The best way to avoid the pitfall of chasing returns is to diversify your portfolio and avoid the noise. According to Delbar, most individual investors underperformed the market in the period from 1999-2019. Why? They gave in to their emotions and deviated from their long term plans. And a bad investment can set you back far more than a good investment can put you ahead. Know who you are as an investor, understand risk well, and assume that things could get ugly at any time.
Connect with Alex, Ed, and the team at Birch Run Financial:
Website: www.BirchRunFinancial.com
Email: info@birchrunfinancial.com
On Facebook: Birch Run Financial
On Twitter: @BirchRunFinance
Phone: (484) 395-2190