Don't Make Emotional Decisions with Your Money

October 01, 2015

Why is it so important to be on your best “investing” behavior? Poor investing behavior can lead to poor diversification, chasing performance, and moving into and out of the markets, often at the wrong time. The typical result of these behaviors? Poor long-term performance, which could lead to the biggest risk of all: not reaching your long-term goals.

The consequences may be even more dramatic than you think. For example, a balanced portfolio (65% equity and 35% fixed income) over the past 20 years would have averaged about a 8.6% return per year. However, the average U.S. investor received about a 3.7% return, due to his or her investing behavior. But with the power of compounding, the difference wasn’t merely 5% a year; it could have been nearly $315,000 over that 20-year time frame.

When you feel your emotions beginning to get the better of you, take a "timeout" and work with your Edward Jones financial advisor to review your goals before making what could be an emotional investing decision. Your portfolio, and your future self, will thank you.

Investing behavior chart

Important Information:

Source: DALBAR, QAIB 2012; Edward Jones estimates. Annualized return for the past 20 years ending 12/31/12. Assumes initial investment of $65,000 in equity and $35,000 in fixed income. The Equity benchmark is represented by the S&P 500. The Fixed Income Benchmark is represented the Barclays Aggregate Bond Index. Returns do not subtract commissions or fees. This study was conducted by an independent third party, DALBAR, Inc., a research firm specializing in financial services. DALBAR is not associated with Edward Jones. Past performance is no guarantee of future results. Rounded to nearest $5,000.

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