Will a disciplined investment process improve your health? We often talk about the Five Requirements for Financial Success – Resources, Knowledge, Time, Desire and Discipline. Recent research implies that disciplined investing can go beyond your finances… it can also be good for your health.
People are not naturally wired for investing. Without discipline, it is human nature to make mental errors, often due to “recency bias” and the “flight” reflex. Recency bias is the tendency for people to believe that the future will be like the present. For example, if stocks are hot, the average investor often ignores risk and increases equity holdings. Then, when a market correction occurs, those that increased their holdings in stocks (i.e. risk) increase their chance of a flight or panic reflex. The result is often economic damage caused by emotional “buy-high, sell-low” investing.
Stress caused by dramatic market movements, the financial press, and investors’ common behavioral mistakes can make people feel queasy. Unfortunately, the health hazards don’t always stop there. A March 2013 study by University of California at San Diego found that hospitalizations rise on days when share prices fall. Another study published in the American Journal of Cardiology showed a significant correlation between a period of stock-market decrease and rates of heart attacks.
One of The Advisory Group’s reasons for being is to bring discipline to the investment process. By helping clients develop and staying focused on the goal, addressing the Five Requirements and applying a prudent process, our clients are better able to separate emotions from investment decisions and focus on the long-term potential of the markets. The result is greater peace of mind, enhanced long-term results and improved well-being.
The global financial crisis and subsequent market recovery provided ample opportunity for the world’s investors to determine whether their decisions primarily rely on an effective process or emotions. The difference in outcomes and impact on one’s health can be stark.
Contact us for guidance with Personal Wealth or Fiduciary Management.