By FPA member, Richard Durso, CFP
Last Updated: May 13, 2013
Having a plan in place is a good way to achieve long-term,
goal-oriented financial success, but what if you allow your
emotions to deviate you from your plan?
This is not to say that adjustments are not necessary over
time. As you know, life happens and change is constant. At any
point in the game of life, your situation can change rapidly.
Fine-tuning your long-term financial plan may be required.
Perhaps the most important guidance a financial planner can
provide you is protection against yourself. You must fight the
urge of allowing your emotions to gain control and losing your
focus. The biggest determinant of long-term, real life
investment outcomes is investor behavior. The best advice you
receive may be when your advisor says: "don't do that!"
Other important advice:
- Do not sell out of all of your stocks in order to buy
- Do not allow the negative media exploit your fears of
nuclear Iran, drought, terrorism, or some other current
- Do not fall victim to the fear, but rather have faith
and confidence in your long-term financial plan.
In 2008 and 2009 when the markets were suffering, investors
who did not panic achieved much better results than other
investors who let their emotions get the better of them. The
lack of discipline (and proper guidance) is a major reason
individual investors get poor returns. For example, for the
20-year period ending 12/31/2011, Dalbar (a research company)
determined that the S&P 500 earned over 9% per year while
the average equity mutual fund investor earned only 3.3%.
(Reference: Quantitative Analysis of Investor Behavior, Dalbar,
April 2012). That was not due to mutual funds underperforming
the market, but rather due to investors moving in and out of
funds and chasing the prior year's returns. Investors
Your success is contingent upon not allowing impulsive
decisions to get in the way of your long-term financial plan.
Investors who did not fall victim to their emotions in
2008-2009, although very difficult, were rewarded. Develop a
long-term financial plan, block out the negative influences,
work with your planner to make any course corrections over
time, and enjoy your life!
Richard Durso, CFP
, ChFC, AEP
graduated from St. Joseph's University (B.S. and M.B.A.).
Richard's specialty is to ensure that family wealth and
values are passed down to future generations through proper
estate and financial planning. Richard is the director of the
education committee and board member for the Philadelphia
Chapter of the Financial Planning Association. He is also a
member of the Philadelphia Estate Planning Council.
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