Timing the stock market
Sometimes the news is scary and it motivates people to make hasty decisions about their finances. A lot of previous research is heard to how people react to news and changes in the stock market.
Most research agrees that making emotional decisions leads to worse outcomes than having a long-term plan. In fact, some studies suggest that one of the biggest benefits of working with an advisor may be avoiding emotional decisions. According to a Vanguard Research study, behavior coaching can add 1% to 2% in lifetime return.[1]
Rather than tell clients not to time the market, I built this stock guessing game to show you how difficult timing the market can be. This game simulates timing the market by giving you past performance and the WSJ Headlines from a random date between July 2022 and June of 2018, then letting you guess the outcome and try to beat the market for that time period. Most studies show that average investors and even investment professionals have a hard time consistently beating the market over the long term.[2]
Try the game:
If you are having trouble, click here to open the game in a new window.
[1] Source: Quantifying Advisor’s Alpha®, accessed: 06/03/2022. Delagify Financial is in no way endorsed or affiliated with Vanguard or Vanguard Research.
[2] The fantastic book The Incredible Shrinking Alpha explains how and why this is true in fantastic detail and is one of my favorite books.
One Response