Financial advisors and market forecasters often get confused in the public eye, but their roles and approaches to financial planning are very distinct.
As a financial advisor, I help clients build a robust portfolio, retire comfortably, and protect loved ones from financial ruin. My focus is on aligning strategic plans with short and long-term goals, risk tolerance, and life stage. Rather than predicting market movements, I build diversified portfolios designed to withstand volatility and grow over time.
Market forecasters, on the other hand, are often more speculative. They may attempt to predict economic trends and events to capitalize on potential gains. This approach is inherently riskier and resembles an attempt to “time the market”, which is notoriously difficult.
First Bank Wealth Management’s approach is a disciplined, long-term strategy that doesn't rely on uncertain predictions but rather on time-tested principles of asset allocation and diversification. We understand that while markets are influenced by world events, the precise outcomes and timing are unpredictable.
It's important to understand that working with the First Bank Wealth Management team isn't about outguessing the market. Rather, it's about preparing for a multitude of scenarios, making informed decisions, and growing wealth over the long term, irrespective of unforeseen events.
By focusing on elements within our control — such as a client’s personal risk tolerance — we can aim to position him or her to achieve financial objectives regardless of market fluctuations.
When working with our knowledgeable team members, successful investing means staying the course and being consistent. Often, this is easy to say but very hard to do because, in practice, emotions can be difficult to control.
Investors may act out of fear, greed, or following the herd, which can lead to overreactions, such as panic selling or irrational exuberance. During times of crisis, the rush to liquidate assets can lead to sharp market downturns. Conversely, excessive optimism in the face of positive news can inflate asset bubbles. These scenarios can create risks for investors.
This is where the role of financial advisor becomes crucial. We understand how each client’s psychological makeup can affect his or her behavior. Our work is to guide clients toward making decisions that are grounded in a solid financial plan, rather than in the heat of the moment.
We help clients avoid three common behavioral biases that can lead to poor investment decisions:
Overconfidence Bias
In the context of investing, this refers to a person's unwarranted faith in their own intuitive judgment and cognitive abilities. It's the belief they can consistently predict the future of the markets or the performance of particular stocks better than average, often leading to excessive trading and risk-taking.
Recency Bias
Recency bias can lead people to give greater importance to recent events or information when making decisions, rather than considering the full context or a longer historical perspective.
Loss Aversion Bias
Loss aversion bias is a concept found in behavioral economics, suggesting that people are more likely to prefer avoiding losses to acquiring equivalent gains. For instance, someone would probably be more upset about losing $50 than they would be happy about finding $50.
One of the core strategies we employ to counteract emotional decision-making is to establish a clear investment policy that includes predefined guidelines for rebalancing a portfolio at certain intervals. Rebalancing a portfolio is the process of realigning the weightings of the assets within it. This ensures that decisions are made systematically and align with long-term objectives rather than in reaction to market noise.
Rebalancing can be done on a regular time interval (such as once a year) or whenever the percentage of an asset class increases or decreases past a set threshold. It's a discipline that can help clients stay on track to reach their long-term financial goals without taking on undue risk.
By focusing on this approach and following facts rather than emotions, we can help clients navigate through market turbulence and stick to their unique, long-term plan. Sticking to a well-crafted investment strategy is likely to yield better results over time than attempting to outguess market reactions to world events.
If you have any questions regarding building your wealth in an uncertain market, please reach out to the First Bank Wealth Management Team.
As a financial advisor, I help clients build a robust portfolio, retire comfortably, and protect loved ones from financial ruin. My focus is on aligning strategic plans with short and long-term goals, risk tolerance, and life stage. Rather than predicting market movements, I build diversified portfolios designed to withstand volatility and grow over time.
Market forecasters, on the other hand, are often more speculative. They may attempt to predict economic trends and events to capitalize on potential gains. This approach is inherently riskier and resembles an attempt to “time the market”, which is notoriously difficult.
First Bank Wealth Management’s approach is a disciplined, long-term strategy that doesn't rely on uncertain predictions but rather on time-tested principles of asset allocation and diversification. We understand that while markets are influenced by world events, the precise outcomes and timing are unpredictable.
It's important to understand that working with the First Bank Wealth Management team isn't about outguessing the market. Rather, it's about preparing for a multitude of scenarios, making informed decisions, and growing wealth over the long term, irrespective of unforeseen events.
By focusing on elements within our control — such as a client’s personal risk tolerance — we can aim to position him or her to achieve financial objectives regardless of market fluctuations.
When working with our knowledgeable team members, successful investing means staying the course and being consistent. Often, this is easy to say but very hard to do because, in practice, emotions can be difficult to control.
Investors may act out of fear, greed, or following the herd, which can lead to overreactions, such as panic selling or irrational exuberance. During times of crisis, the rush to liquidate assets can lead to sharp market downturns. Conversely, excessive optimism in the face of positive news can inflate asset bubbles. These scenarios can create risks for investors.
This is where the role of financial advisor becomes crucial. We understand how each client’s psychological makeup can affect his or her behavior. Our work is to guide clients toward making decisions that are grounded in a solid financial plan, rather than in the heat of the moment.
We help clients avoid three common behavioral biases that can lead to poor investment decisions:
Overconfidence Bias
In the context of investing, this refers to a person's unwarranted faith in their own intuitive judgment and cognitive abilities. It's the belief they can consistently predict the future of the markets or the performance of particular stocks better than average, often leading to excessive trading and risk-taking.
Recency Bias
Recency bias can lead people to give greater importance to recent events or information when making decisions, rather than considering the full context or a longer historical perspective.
Loss Aversion Bias
Loss aversion bias is a concept found in behavioral economics, suggesting that people are more likely to prefer avoiding losses to acquiring equivalent gains. For instance, someone would probably be more upset about losing $50 than they would be happy about finding $50.
One of the core strategies we employ to counteract emotional decision-making is to establish a clear investment policy that includes predefined guidelines for rebalancing a portfolio at certain intervals. Rebalancing a portfolio is the process of realigning the weightings of the assets within it. This ensures that decisions are made systematically and align with long-term objectives rather than in reaction to market noise.
Rebalancing can be done on a regular time interval (such as once a year) or whenever the percentage of an asset class increases or decreases past a set threshold. It's a discipline that can help clients stay on track to reach their long-term financial goals without taking on undue risk.
By focusing on this approach and following facts rather than emotions, we can help clients navigate through market turbulence and stick to their unique, long-term plan. Sticking to a well-crafted investment strategy is likely to yield better results over time than attempting to outguess market reactions to world events.
If you have any questions regarding building your wealth in an uncertain market, please reach out to the First Bank Wealth Management Team.
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Ron Manning, CFA, CAIA, CIPM, is a Portfolio Manager II for First Bank Wealth Management. With over 20 years of experience in financial services and a deep knowledge of investment portfolio management across both traditional and alternative asset classes, you may contact Ron Manning at (925) 746-2800 or via email at [email protected]. |
Investment and insurance products are offered through OSAIC INSTITUTIONS, INC., Member FINRA/SIPC. Osaic Institutions and First Bank are not affiliated. Osaic Institutions does insurance business in California as Osaic Institutions Insurance Agency, CA Agency License #OH30186. Products and investment advisory services made available through Osaic Institutions are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value. First Bank Wealth Management is a trade name of First Bank, and certain products and services are provided through First Bank, and its affiliates and subsidiaries. Neither Osaic Institutions or First Bank, nor any of their affiliates or financial advisors, provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. Use FINRA’s BrokerCheck to learn about the professional background, certifications, licenses, and any regulatory violations or complaints for any financial advisor.