After a couple month hiatus (we will announce the reasons for that soon), we’re back in the saddle here on The Backcourt Report. For the 12 readers of this site – we apologize for lack of recent content!
Process is critical as investor outcomes are directly impacted by every decision that’s made. The market will expose those that have a true process from those that don’t. If you are asking yourself which side of that fence you’re on, the timing of your decisions is a great guide to your answer.
If you make decisions in the middle of heightened volatility with emotions at the forefront, that’s a good indication that your process needs attention. Frankly, the timing of emotional decisions almost always works against investors. Selling when you panic that the world is ending, buying when you panic because you are missing out on the upside, etc. All of those decisions expose investors directly to the root cause of why the behavior gap exists in the first place – emotions. Investors have a hard enough time keeping their behavior in check as it is. Their adviser’s behavior should not layer on.
Build a process. Understand the process. Stick to the process. The timing of your decisions is vital to investor success and should be controlled and calculated… not dictated by emotion.
Understanding what and why your portfolios look the way they do will go a long way in improving your ability to stick to your plan. Spend the time now to build that understanding. A sound process is the first step in systematically guiding behavior in order to reduce the behavior gap.