“What should CEOs know right now?” Atlanta’s Soyini Coke asked me recently during her local business radio show, “CEO Exclusive.” That question kicked off a discussion about the current investment environment, human biology and our “reptilian brains,” and problems with traditional wealth management.
Soyini and I covered a lot of ground, and the conversation is relevant and potentially intriguing for any individual investor, not just a CEO.
“I think people should be very aware of their reaction to what they’re seeing in the marketplace,” I responded. “There’s been a lot of growth in U.S. markets from an investment perspective, and some investors feel they are missing out, particularly if their investment strategy is based on asset allocation and diversification. That’s something to be very careful about, because it can cause you to abandon sound investing principles.
“Feeling you’re missing something can be very difficult and can cause you to react based on your emotion,” I continued. “You may justify it as a logical response, then make significant changes in your retirement plans or investment portfolio that prove to be big mistakes down the road.
“Managing the emotions around what we call the ‘home team bias’ of seeing US markets do so well can be challenging for many people,” I explained. “We often forget past trends that we’ve gone through. We want to jump in at the right time, which is usually wrong, because that’s just how we’re wired as humans.”
If you’d like to hear more, you can listen to our interview here:
If you don’t see the embedded audio controls, you can listen to the MP3 here or use this OGG file to stream on a Samsung or other mobile device.
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