1. Doug and I are back for our weekly insights. Welcome, Doug.

Thank you, Jay.

So the question I have for you this week is what's an action bias?

Right. Yeah. It's this this feeling particularly. In challenging situations that you must do. Something. Right. And you can imagine where this probably came from, you know, think about our evolution probably taking some action in the face of danger or downside was probably a very good. Rate. But when it comes to investing, action bias generally does not work. Favor.

1. And so so specifically to reference, we last week we talked about the correction right, and and then we saw a little bit of.

A change. Yeah. Yeah, so. It's it's quite an interesting example. So at the peak of the I call it sort of the red screens on CNBC when all of the graphics. The red and all of the, you know, the media was talking about this correction, which means the market is down 10%. You know, emotions are high, right? And there, you know, the media obviously is. You know, that's how they get paid to create this excitement. But what we saw is literally the day after that. Or actually the market started to rebound. So if you had, you know, fallen into the trap of action bias and decided to do something in your portfolio like sell out of equities and put it in cash, you would have missed the 4 1/2 percent rally that's happened since then, in in US equities.

Hmm.

Yeah, I think it's hard, right? The IT was really goes hard into. Items that they want to promote and talk about, and I think you know someone you know on the marketing side like I see those and and I I feel that same anxiety too. And so is there like what could you recommend to folks? I mean I know we've been talking for a couple episodes now about trusting the system and the process. What else you know? Can you can you show people or tell people that to maybe calm them down in kind of those times?

Of panic, right? Yeah. I think it's important, you know, we talk a lot about preparing the portfolio, right. And that's sort of what we're doing, right? We're not predicting, we're preparing and diversification. You know, we talked about it at NASA. See them? It's one of our favorite topics, but as an individual investor, you need to prepare yourself really mentally for these moments, and you can do that by looking at history, understanding, you know, for your risk allocation. Let's say you're a, you know what I would call a growth investor. You've got 75% of your.

Yes, yes.

Hmm.

Assets and equity. You can expect the market to fall 10% within a year, pretty much every year. And if you look at, you know on a yearly basis, if you look to look at history, you're going to see those 10% declines happen pretty regularly. You're going to see years, you know, full year down 20%.

Yes.

On. Occasion and you need to be prepared to take that risk and understand that's just part of the risk you get for for the reward that hopefully is down the road for the long term. Investors who stay the course.

Yeah, I like that. And and it's hard and I think that's why, you know having. A professional financial planner on your side is always good to to kind of help you help you through those times.

Right, yeah.

Yeah. And then so. Talking about that, we saw the rebound and then what's what's kind of the headline? Of the week for you. This week.

Yeah, I think it's just resetting those expectations, right, we you know, hopefully you know, you didn't fall into the trap of action bias. You stayed, you stayed invested. And so now. Fresh start on the new. Week. Last week was kind of flat this week, markets up a bit. I think it's just about how quickly the market can change. What's happened this week. We've had a bit of change of tone in terms of tariffs, maybe they're not going to be as onerous as was originally discussed. Market likes that. So we get a rebound. Again, we don't want to be reacting to these, but that's what seems to be driving.

In.

To market this.

So Yep. And then as we I know, we don't really look ahead or try to predict the future, but what are some things that maybe folks can be prepared for so that they don't if something happens, they don't really get panicked.

Right. Yeah. I think they should be. Prepared for anything? Yeah. I mean, I know that sounds pretty generic, but you just don't know. And I think, you know, I like to use this example a lot. We've we're into episode 3. I've probably already used it. But you know, think about the pandemic, right? And how unpredictable that was and how big of an impact it had on the markets, right? We had a significant market decline initially and a very quick rebound. And then because of all the stimulus that went into the economy, a tremendous performing. The stock market, nobody predicted that, and probably nobody would have predicted. How the market reacted? Had they even known it was going to happen? Right. So you just have to be prepared for moments. That's an extreme example. Yeah. But you should go into every week just prepared for whatever it might throw at you and ready to take advantage of it again. And I'm going to hit it again and again, probably every week. Day. But diversification. Yeah, systematic rebalancing, systematically selling high and buying low. So if that opportunity presents. Itself, you're ready for it. You're going to take.

Advantage of it? Yeah. And I think I would take that even further. And for those of you that have been keeping up and I'm going to have my last interview with Greg about behavioral finance on this episode. And really I think another one advice that Greg would give you and the things we talked about, it don't even look week. Week right like. Just give it a rest and, like, let it sit like and know know that this happens and there's gonna be news that's gonna go up and down. And you, you're in it for. The long term and that's where you should stay.

Right. Yeah. Don't even look at. Don't look at the financial news. Don't look at your portfolio day-to-day. Those are all. That's all great advice for long term investors.

1. And so, yeah, I think this week insights on the on the blog was very focused towards this topic. Yeah. And also comparing it to soccer. Yeah. And so why why the why the comparison to soccer?

Yeah. Well, I said there's two reasons. One is I am surrounded in the office by two super fans. So Matt and Dave on either side of me both are regular premiership watchers. But then also it allows me to bring up my story about David Beckham, which is it's on the strategic website, I sneak it. In. Yeah, now and again, but it's it's a claim to fame if.

You will. Yeah. I mean, so, so really quick. I'd love to hear the story. I know. But. But. But please tell us just. A little bit. About how you played David with them.

Yeah. Yeah. So back when I was in high school. My coach decided he was going to take the team overseas. He'd always wanted to go, so he decided this was the year we raised money and we went over and played a bunch of different soccer teams over in England. Tremendous experience, had some good games and bad games, but overall just a wonderful time. Fast forward from there to about 15 years ago, so quite a few years later and won't do the math exactly for you.

Yeah.

A friend of mine says, hey, did you hear? We played against David Beckham when we were in England. I'm like, well, that's that's a great story. How in the heck can you, you know how? How the heck do we verify that? Well, sure enough. I I'm telling my parents this story. My mom says I oh, I have your agenda from back in 1990. She pulls it out and sure enough, we played the Brimstone Rovers youth team, which David Beckham was on in 1990, and he was the.

Oh.

Player of the year that year? Yeah, man.

Yeah, I love that story so much. That's so good. Well, there you go, everyone. I know if you read the weekly insights, you're like, well, now I want to know the story. You were just like me. And here we are. And and because of the podcast, I could force him to tell us right. Here we go. Well, thanks, Doug. Thanks again so much. And look forward to hearing more in the future.

Alright. Thanks Jay. Take care.

Come back. I'm back with Greg. I'm very excited. Still still excited 3IN.

Amazing. We're we're still doing this.

And we're kind of wrapping up for now our little series here on behavioral finances and and just kind of understanding our own biases. Our own emotions and you know, we kind of introduced it to you. We talked last week about all the not all of them, but a good chunk of the biases you can you can face and. The world and and how they relate, not only to finances, but all my real world examples that I toss in there and that's just cause that's just how I relate it to myself. And now we're gonna kind of talk about. Some actionable, I guess skills, actionable things we can do to to avoid some of this or to. Maybe know, you know, fight against it a little bit. Maybe too, right. Like, I don't know that we can avoid all of them, but at least we can put some road blocks in place to hopefully stop us from doing some of those emotional things. Absolutely. That does that sound fair?

Yeah, that's a perfect description, right. I mean, there's there's certain ways that we can. Kind of correct in the moment. And there's also some certain things that we can do proactively to head off these, you know, these cognitive biases that we all have, that we're all prone to. We none of us are robots. We all have emotions we all have. Feelings. We've all had things that have impacted us and and changed the way we feel about things. So it's there's things we can put in place to try to. Avoid those and and make our investments more of a. You know, rational evidence based approach versus. Responding kind of a knee jerk ways to. You know, emotions.

Yeah. Well, and I think for the listeners, the, the good news for you is you're already a couple of steps on because our first one is education and self-awareness. So that's right. You're already on the path to success.

That's exactly right. You've already gained the building blocks.

Yeah. Yeah, cause I, you know, one of the first things is just being aware about it, right, Craig?

It is, and that's where it really where it all starts and we I think we have talked about this in every episode. So we may as well complete the hat trick, right? The Gordie Howe hat trick, it's. Being aware of what we're doing right and and kind of being able to step outside ourselves and look down at what we're feeling and just kind of naming it and identifying it and recognizing it is so important that emotional intelligence and. We all are subject to emotions at different times and. You can't stop emotions from coming right there. There is no way that I'm aware of for humans to unless it's with significant, you know, medication. To. Avoid being sad sometimes. Avoid being happy. Avoid being feeling overwhelmed or anxious. These emotions will come right. There may be all sorts of triggers, external, internal, whatever the case may be, these emotions are going to come. What you can do, right?

Oh.

Kind of at the at the peak of self actualization is regulating them, recognizing them, being aware of them, and then taking steps to regulate them. And you can do that in the moment, and then you can also take steps to. Almost kind of dummy proof yourself from some of your emotions and and and head them off and and even if they're happening, it's not going to impact things because you've already put a few things in place, right?

Yeah, I like that. And I think it's. It's kind of putting in the checks and balances of just the whole, the whole of yourself basically right and exactly.

Me, right?

And I mean, I think we do, you know, to give credit to hope for myself mostly. But you know maybe some of our listeners, you know I think in this day and age hopefully we're already doing that and and you know. On looking at things I know, I always equate these to real world, but like one of the things my favorite thing to do lately has been my wife will see like a poster for a new movie that's coming out on Facebook which like is this real or is this AI right and we have to really sit there and think about it and I go no, it's a it's a I. And so hopefully doing that with everything, especially with financial decisions, right, and your risk tolerance and just looking at it and going, is this how I really feel about this or am I just reacting to something in this moment? Is there some sort of outside? I'd influence that's that's making me make this decision or or calling Greg to to say I want to get out of this particular investment, you know.

Exactly. And I think you know, if you look at the way that we approach it and I think any good financial advisor approaches it. It's kind of beginning with the end in mind, right? So. Sitting down with folks talking to them about what the next 1020 thirty, 4050 years. That, that, that, that they wanted to look like and you know, where do they? What? What is their definition of great life? That means very different things for very different people, right. I mean some some want the the second home and and and warmer climates. Some want something very different than that. It it it it's going to differ person to person.

100% yeah.

So we sit down with folks, we talk to them about what that looks like for them. If they can envision it, what do they see? Then we talk about where they are currently. Income stream expenses, obligations, etc. Upcoming things that are going to need to be funded and dealt with, you know, could be a child's education, could be, you know, wedding of your, of your daughter could be a number of different things. We we want to talk to them about their comfort with risk and the risk that they are. Uh. Comfortable in taking and and how and how they respond and feel about shifts in the market. Yeah, that's important. Yeah. And there's there's tools to do that. There are risk questionnaires. They're not foolproof, right? There's a lot of there's a lot of variability across all these different questionnaires. They're they're not, you know, a perfect measurement, but they're at least a A staff, a tool, really. What it comes down to is getting to know your client and getting to know. Geez if. The market drops 10% in a day, right? Like picture COVID some of the steep drops that we had during the the heightened fear of COVID. Are you someone that's going to? Call me and say, sell everything. Are you someone that's going to kind of stay? Stay calm. Are you someone that might not? Even know that? It's going on because you you know that this is a 30 year deal and and and you you just trust that everything is in place. Yeah. Getting to know folks on that kind of intimate and personal level is important, right? Because it it it plays into what you put into place. For them, in terms of kind of combating some of those emotions and biases.

Well, and I think it's interesting, right? And this is one of one of our actionable items which is consulting with an advisor who has an unbiased perspective. And I think to that point. You personally may think you're OK with risk and and a high risk, and then when it happens you then suddenly go Oh no, I wasn't. I wasn't ready. That was not what I thought that meant, you know.

This doesn't feel good at all.

I you know, I said I was ready for this, but I am not and I think that's where a good advisor comes in and says, OK, you know, yes, you you you're saying. High risk. Let's let's go pedal to the metal. But what you know, let's let's talk about what that actually means. Let's look at it and and you may back down from that and be more moderate or or you know, or some risk, you know. And. And I think just having a a person who who's rational, who has the expertise, who has an outside perspective. And just can have that steady hand on the wheel. Is is going to be. Helpful for you.

Right. That's exactly right. And there's, you know, there's there's a few different ways of looking at that and a few different approaches. There's. There's the risk that we're comfortable with, but there's also sometimes the risk that we need to take right. So if somebody comes to us.

Yeah, of course.

You know, and they're 55 years old and maybe they had a number of different life events that impacted their ability to really save and plan for the future. They could have gone through a divorce, they could have gone through a major medical issue that sapped their resources. You see this in a number of different scenarios. And they're now they're behind, right? They want. They don't want to work till they're 90. They want. They would love to retire at a reasonable age, say 65, even 70. And they're behind the 8 ball well. We show them what the projections play out right at this level of saving at this type of portfolio. This is what you can hope you know reasonably expect to have at age 65 or 70. It may be that you need to take a little bit more risk to achieve your objectives, but the important thing is having that conversation and getting buy in. Investment policy statements can play a big role in that kind of showing. This is what we talked about this. This is what you know, this is what are your goals are. This is what we need to do to reach those goals. This is the allocation that's required to do that of your portfolio. That's a big thing, right? And then you go, you always revisit that right often. Is this still good? Does it still feel good?

Of course, 100% yes. Right.

You know, let's look at where our projections are. Are we on pace, are we off pace? How are you feeling about it? How did this last few days in the market feel to you, right, we've got a new administration.

You know.

Changing a lot of policies all at once, a lot of different changes, putting some stress on the market. How did that feel? Yeah. Are are you queasy at night? Are you not sleeping because we don't want folks not sleeping? That's the last thing we want, right? We want them leaving our office and going forth in life feeling lighter.

Yeah.

If they're, if they're feeling lighter and no, like you said, there's a steady hand on the wheel. Yeah. And they trust in that. Then we're really doing our jobs well.

Yeah. And I I think that's big, right cause you know with any with any decision.

And.

That's that's emotional and and has any like long term effects tied to it, right, it's it's a difficult decision in the moment and I find for me personally. Sometimes I wasn't 100% paying attention because I was. My mind was roaming on this one thing that somebody said or or am I? Am I really ready for risk like and that's just because I'm for the rest of the meeting, you know? And so having. That ability to. Connect with someone you know and say OK, can you remind me? I know we talked about this or or have the documentation in front of you and go. OK, this one. Yes. All right. I understand what we're doing and just not every day. But you know, annually checking in and just making sure like.

Right, right.

Are we still going?

And the and the and the flip side of it is a is a big thing too. People always think about. That they might have, you know, buyers remorse, so to speak.

Hmm.

When?

They've chosen a very aggressive portfolio and we go through a volatile period and there's a there's a dip right in performance and and in their values. And you have to talk them through that. OK, this is, you know, this was what led us to this allocation, right. These were your goals. These are the projections. This is what it was showing. This is why we, collectively, together, chose this. But we see it on the opposite end of the spectrum as. Well. When we meet with folks and they are adamant. That, Oh no. I have no risk tolerance whatsoever. This stuff makes me sick to my stomach. I will be up all night, every night if I see massive swings in My Portfolio. So if we match a portfolio very tailored to that. Very conservative to limit the volatility as much as possible. That's great. But we but. That also needs reminders, right? Because in great market times where equities are going through the roof and they're seeing because we've talked about this.

Yeah.

They're getting all kinds of onslaught of information on a daily basis from TikTok and Instagram, and the news channels and and all the various Oh my God, the market's on fire. People were making money hand over fist and they're seeing a 3%. Growth. Great. Well, how come I'm not? Yeah, making all this money that tick tocks talking about. Well, remember, like, this is what you know, right? There's trade-offs, right? Right. So it's that revisiting it's it's keeping on track. It's it's that you know. Looking at the end goal, but also you know, making sure that we're in line with that. Our unique risk risk tolerances.

Yeah. And I think, you know, one of the topics too, we wanted to cover, which is in line. With. That is. Avoiding those present biases, which is up or down or up or down right, is kind of automating a lot of this and just saying OK. Whether it's you or you're doing it with your advisor, you're just going to automate the investments and you're just going to take a step back. Because it's just going to make that just that first decision, once allowing that future growth without you affecting it based on what's happening that day or that month.

That's exactly right. I mean it it just it, it becomes a thing that you don't think about, it's it's going out of your account automatically or out of your paycheck automatically. It's why a lot of retirement plans now have an automatic opt in feature right to push people nudge people towards saving for their future. They have to take an affirmative action to opt out.

Hmm.

Of the retirement plan, it's it's kind of nudging folks towards these things that are for their own good, and that does that does come back a lot of it and really. You know the it's the advisors job to to constantly bring you back to your plan, right? Every one of our clients has a financial plan tailored to them and it covers all sorts of different categories you know. Tax efficiency and estate plan and insurance analysis and retirement and budget. And it's up to the adviser to constantly be checking into that plan and saying, OK. Even with all the volatility, yeah, you know, we've got this in place. Check. We've got this in place. Check, like, reassuring them that we're still on the path to where they want to get to.

One, I think 2 setting those long term goals or or your you know, deciding what your great life is in 20. 30 years. You'll start to see the patterns right of how that's working out. And so when you get in a couple of years into this and you have those long term goals, you're not. Torn by these biases, these impulsive biases, and you're just seeing the pattern. You're going ohh. You know what? There was some UPS. There was some downs and we've just seen a steady return. That's actually not bad.

That's exactly right and.

That's actually really good.

Yeah, and and when looking at, you know and that's one of the ways to to combat this, right is showing folks. Look, look what the S&P has done over the course of the last 75 years, 100 years. You know it. If you are well diversified and you've got a portfolio in line with and in accordance with your goals and your risk tolerance and it's being rebalanced and looked at like we do on a weekly basis. It's it's going to work. Yeah, you have. You know, I hate this. I I have grown to hate this expression because it now represents a complete failure with the Philadelphia 76ers. But trust the process, right? Like, if you remember when Dole and Bead came aboard, it hasn't worked out that well.

Yeah, yeah, yeah.

For for the 76ers. But in in many ways, you know. Evidence based. Stick to the plan. Yeah, revisit frequently, right? Make sure that everything is still in accordance with your goals and your and your risk and and all of those things. But it's up to the advisor to sometimes convince folks that. The most important action you can take right now is not taking an action action. That's right. It's sometimes taking that drastic knee jerk reaction because.

In. Yeah, yeah, yeah, yeah.

That's.

Inherent in all of us, if something bad is happening, chaos is flying all around. We want to do something. Yep, well, sometimes that's the worst thing you can do and ask the folks that, you know, went to cash. In the height of COVID you know they missed that rebound that happened just a couple months after, right that that drastic action is sometimes the the worst thing for you so.

Yeah.

That's really where the advisor kind of earns their earns their keep.

Yeah. And I and I think too a take away for the audience as well is and. And you had said it and there is diversity and embracing that and understanding that like you know, let's take NVIDIA an example, right? Like that starts to shoot to the moon. And a lot of people like put everything I have in NVIDIA right. And and you just you don't want that right? Because that where there's an up, there's a down and you want to make sure that you're guarded against that. And so by diversifying like sure maybe maybe there's a little bit in NVIDIA or whatever to get you get you some money, but you want to diversify across multiple assets and classes. So that you're.

Stable. That's exactly right. I I don't. It was said here recently. By either Alan or Doug. And I. Stealing it as my own, I've used it 100 times since then. Diversification means always having to say you're sorry. There's always going to be 1 hot sector, 1 hot stock, one very narrow thing that's. Taking off or or outperforming everything else and geez if. You were, you know, psychics. You'd have, you know, you'd have it all there, just like you just said. But that's not that is not logical and and it makes you know it's not responsible. And it would breach our fiduciary duty to have you allocated across a number of sectors. That way you're going to take advantage of whatever is, you know, the hot thing at the moment. Sure, there may be something else that lags at that particular time. That's OK, it's kind of part of.

Yeah.

The overall plan, right? Yeah.

Yeah. And just just. Trusting in that process, it, like you said, and in the plan and then just going back and and just really thinking about. You know, you're realistic. Great life, right? And just saying OK. Does this up or down or whatever it is truly affect that great life? And a lot of the time the answer is no. It's correct. Yeah, because it's that great life isn't, you know, maybe for some people we have dreams of, like being a millionaire, a billionaire or whatever that is. But like, is that a realistic great life or is your great life, you know, just in 3050 years, oh, I got grandkids, they come over, we have a house that's paid off. We. You know, we've got maybe we get to go on a vacation twice 2-3 times a year with the with the grandkids and our children. That's honing that and grounding it into something that's based in reality. I think is is the best for all of us and just say what, what? What am I what do? I really want out of this.

100% and you know what we often see sometimes is. You know, folks are existing off of far less than what they have, right? And you know they've got. You know, X dollars invested in their, you know, in their they're not even coming close to to needing all of it, but yet they're emotions.

Yeah.

Are as if you know they can't make you know they're they can't eat next week, so you have to say, wait, hold on. Let's let's take a larger picture here. Your your income stream is X. Your expenses are Y. Your assets are actually growing year after year in retirement. They're not even, they're not even dwindling down, so. A turbulent month a a turbulent cycle is not going to impact your day-to-day life in any way, shape or form. You're actually managing these investments for the next generation. So let's think about what a 20 year old would want in terms of allocation, because that's really who you're managing these investments for, right? So it it's.

Right.

Every situation is different. Every client's you know goals and situation and great life is unique to them. So it's knowing that and and and it's taking that that broader long term approach.

Yeah. And you know, there's just so many. Different ways like you said that the great life is different and there's so many different ways that that looks to you and I think not getting stuck in. That classical like what a great life is, you know, like and just thinking about personally what what it is to you because you know, I think well, we're all surprised on how much or little money that actually is needed to make that possible, right.

100% and. Generation we're we're seeing very big differences generationally too. And I think that is also something that you know, is a difference maker these days in terms of.

Yeah.

You know, I've talked about emotional intelligence and and how that plays into, you know, kind. Of. Setting yourself apart as an advisor. Well-being aware of and and and knowing generational differences and how people look at things generationally is. I think. As important as well, because you know what we're seeing is people you know coming out of college now and entering the workforce now have very different priorities and ways of thinking than our clients that are in their 70s and 80s and what they value 100%. You know, we're seeing more experiences.

You have one.

And not as much, you know, emphasis on kind of the. The the second home or or you know, whatever the case may be, they they want their money on travel and and experiencing this and. Very different and and very different risk tolerances and and very different, you know, attitudes about money. Yeah. So the one size approach does not fit all. And you have to, you know, you have to be aware of who your client is and and you know what's important to.

Them. Yeah. And I think for the listeners. You know, again, understanding that for yourself and saying, you know, and not having that like. You know that that looking at your neighbors and going, oh, well, they're they're doing all this and and really asking yourself is that is that your great life or is that just what you think you should be doing?

And don't fall into that hurting trap, right? We've talked about that before, and it's, you know, and that that.

Right, right. Yeah.

That goes across social media and then all these things like, oh geez, you know so and so's on this trip. How come I'm not on that trip? Well, do.

Right, right.

You even. So be on that tour.

Right. Do you want to go see Taylor Swift? The answer is. Yeah. Yeah, yeah, yeah. Everyone's a yes on that. But but.

Yes, of course. Resoundingly, yes.

But yeah, I think I think that's good and I hope the folks at home are really get to pick up some stuff about this and can look internally and and hopefully catch some of these biases in themselves. And yeah, I'm looking forward to having Greg on again. And thanks Greg so much.

This was great. Enjoyed it. Thank you.

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