The Added Value of Your Advisor in Times of Crisis
Aversion to Risk, How Can You Beat it
The work of Daniel Kahneman, 2002 Nobel Prize in Economics, and Amos Tversky, both of the famous Chicago School of Behavioral Economics, has taught us that fundamentally the individual does not like taking risks. But this observation is confronted with a very simple observation. In 1980, the portion of GNP devoted worldwide to gambling increased all over the world even though the expectation of winning was negative.
It is therefore difficult to say that individuals avoid taking risks in all circumstances. The papers of Kahneman and Tversky has even shown that individuals faced with complex choices adopt simplified rules to take a decision.
In the investment world in times of crisis, this way of doing can lead to substantial losses.
Investor Behaviour in Times of Crisis
We are currently living in a period of great volatility in the markets. A typical investor quickly goes from optimism to euphoria in the face of market recovery. He reaches this state of mind and invests heavily without knowing if the markets have reached the peak of financial risk.
If this is the case and the markets start to fall again, he does as at the Casino: "No worries, I will recover". The markets continue to fall, he panics, gives in, and becomes discouraged. He cashes in his last chips without knowing if his luck was not turning.
By selling his investments in the trough of the wave, he loses money and an opportunity to take advantage of the peak of investment opportunities.
How Would He Have Known that Markets Were to Rebound?
The great added value of an Advisor in times of crisis
Emotions of the moment, not to say euphoria, often leads investors to take actions that they will quickly regret.
Moreover, do not listen to the brother-in-law, the neighbours or the corner’s Joe-Knows-it-all.
A financial advisor knows your short, medium, and long-term goals and never lets himself be guided by his emotions. He remains in constant contact with fund managers and experts in market behaviour. It will help you avoid the pitfalls of financial risk highs and take advantage of the peak of investment opportunities.
Remember that human faced with complex choices often use heuristics, that is, simplified rules to make their decisions. Or feel omnipotent and say to themselves: "I'm going for it, I'm sure of my hunch!"
It is the role of your advisor to guide you safely through the storm we are currently experiencing.
Do not hesitate to contact me should you have questions or doubts.
Take Action
The best time to act is now. Do not wait, book an appointment now.