Let us tell you about two investors, Mrs. Slow and Mr. Wild.
Mrs. Slow and Mr. Wild each have $100,000 to invest.
Mrs. Slow and Mr. Wild both said they would be very happy if they could double their investment over 10 years.
Mr. Wild sees his investment quickly rise to $500,000!
Mrs. Slow loses money early in her investment journey.
Mr. Wild begins to experience negative returns following his early success.
At the end of year 10, both Mrs. Slow and Mr. Wild have $200,000.
Both investors said they would be very happy if they could double their money over 10 years. Both achieved their goal.
Mrs. Slow is pleased with her investment returns.
So why is Mr. Wild very disappointed despite achieving his goal?
Mr. Wild’s reaction is very common.
Mr. Wild anchored his performance to his early success. Anything less than $500,000 feels like a failure.
Investing is often full of ups and downs. It’s easy to focus on the journey rather than the destination.
Anchoring is a very common cognitive bias, especially when it comes to money. Overcoming bias in financial decision making is very difficult. It requires perspective and good coaching. At TVAMP we believe helping clients focus on outcomes can provide just as much value as choosing the right investments.
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Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and TVAMP makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Information contained on third party websites that TVAMP may link to is not reviewed in their entirety for accuracy and TVAMP assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from TVAMP. For more information about TVAMP, including our Form ADV brochures, please visit https://adviserinfo.sec.gov or contact us at (865) 226-9982.