Don’t let them fool you…Advisors love crazy markets. You see, this is the time they prey on the weak because they know that the research shows that money is on the move. In fact, a Wall Street Journal column from October of 2008 tells us that 4 out of 5 investors were open to moving their accounts.
The reasoning is simple. We as investors are wired the wrong way to be successful investors. We want to sell when we feel scared (LOW), and buy when we see limitless potential (HIGH). Worse yet, when things are crazy (VOLITILE), we want to believe the grass really can be greener on the other side and entertain ideas of change.
As I network among my fellow wealth managers, volatility always raises the same conversation. Let me take you back a week for an example.
Other Wealth Manager: “Man, how about those markets.”
Me: “Crazy huh? I don’t know about you, but how tired are you of hearing our peers talk about how they saw it coming and moved all their clients out of the market before it went down? If they did that, the market would have gone down earlier because there wouldn’t have been any buyers!”
Other Wealth Manager: “Ya.”
Other Wealth Manager (5 minutes later in his self introduction to the group): “I’m John Doe and work for ABC Advisors. How about those crazy markets lately? Fortunately, my model saw this coming and I got all my clients out. I just feel bad for them I was a week early.”
For those of you without a wealth manager, in your search don’t forget that “if it sounds too good to be true…” Conversations like the one above are impossible to prove in our industry and need to be carefully scrutinized, because more often than not they are completely misleading and a pitch to put your money in motion. Change can be expensive and most often puts you right back where you were with different names or investment vehicles after new commissions or trading costs are incurred. Remember that the only way to avoid market volatility is to not be in the market and that the best you can do is carefully construct your assets in a way that make sense for your personal situation. There are alternatives to the old story however, and this is a time to work closely with your professional and listen carefully to some of them to see how different ideas can do wonders in reducing the volatility these crazy markets throw at us sometimes.