Behaving your way to wealth


Hands holding a tree

Many BC residents put massive amounts of energy into things they cannot control when it comes to their investments. Trying to time the market, buy the hottest stock this week or betting on what Donald Trump will tweet tonight.

In the end, your own behaviour is the only thing you can control. The good news is this can be the most important variable for investment success.

While it may be good coffee shop talk or banter with your friends over dinner, discussing how much your stock position in a particular company gained this week is irrelevant over the long term.

According to research company Dalbar Inc., the twenty year S&P 500 index averaged 9.85% a year (as of 2015). Over that same time period, the average equity investor earned only 5.19% a year. We have a behavioral problem with investing.

If we try to time the market or switch funds to the flavour of the week, we leave returns on the table and spend our time trying to control things we can’t.

What you can control is setting a target in real dollars that you want to reach. (It should be part of your financial plan!) Secondly is investing a specific dollar amount (whatever you can afford) on a predetermined frequency regardless of market timing. Weekly or monthly contributions are the most common.

Put your effort into what you can control (your behaviour) and don’t spend energy on what you cannot control (market timing, trusting a “hot” stock tip from a friend, or short term performance).

Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, Chris Mills, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member - Canadian Investor Protection Fund.