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November 5, 2023 • 44 mins
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(00:01):
In your corner, saving one investorat a time, working for clients,
not companies, all while bulleyproofing portfolios, totally committed to sharing academic truths about
missing always representing Main Street and notWall Street. Team, It's your Son
Money team, and this is theSound Money Investment Show with Town Financial Advisors.

(00:26):
Hello and welcome to the Sound MoneyInvestment Show with Brown Financial Advisors.
I'm Greg Brown and I'm James Boortham. We are a registered investment advisory firm.
We are independent. We do workfor clients, not companies. To
receive your complimentary and personalized financial incomeplan, give us a call five one
three, five seven, five nineto sixty five four. Perhaps you're seeking

(00:46):
some advice, individual advice on anold four one K four to three B,
some type of employer sponsored plan,perhaps even anyway, analysis here's the
point. If you're no longer withthe company, then as a rule,
your money should not be there either, So it can help you take control
of that, whether that's rolling itout into a tax cutral IRA, splitting

(01:07):
it with the nuay. Give usa call five one three, five,
seven, five nine sixty five four. Our website Brownfinancial Advisors dot com email
team at Brownfinancial Advisors dot com.Our home office is in Milford, but
we also have locations in blue Ash, Westchester, and Forge, greg Well.
Today we're going to look at howbehavioral biases can affect your investment success.

(01:29):
It can do that about anything.A bias can unless it happens to
be leaning into the right bias theright time, for the right reason.
And if you lean into some biasabout you want to be successful on purpose
with your retirement, your investment success, then we are here to help you.
But in the meantime, let's learnhow to take some emotion right out
of the investing and help you besuccessful in your overall retirement. If you're

(01:49):
recently retired or plan to retire,say in the next three to five years,
you may be feeling a bit anxious, perhaps even overwhelmed, right,
and the emotions of investing, that'sa big one. You want to make
your smart financial decisions as your approachretirement, and it's not an easy task.
So it's understandable if you feel alittle bit under the gun, a

(02:10):
little bit of pressure. It's humannature that our emotions are. Even behavioral
biases can sneak up and impact andinfluence and for some reason even control our
decisions and our decisions making as we'regoing to make decisions about investments or financial
aspects of our life. So youknow, when you consider that these are

(02:35):
in effect impulses, the impulses thataffect decisions that can undermine outcomes. And
this outcome could be hindering your investmentsuccess and your overall retirement outlook, what
are we going to do about it? Well, if we learn to overcome
the emotions and the behavioral biases,just like a little bit of say,

(02:57):
psychotherapy with you and your money,we can learn to control our reaction.
Right, you know, you havean action and you have a reaction.
If you think about it, youshould take an action. And your action
is purposeful, it's intentional. Andif it is pre thought, kind of
pre planned, well, if there'sa word in the root word there,
plan, then you can have abetter outcome. You can shape and mold

(03:22):
with a vision, you can craft, you can make, you can pre
create even I guess pro create yourinvestment outcome. And if you think about
an artist with a vision who approachesa blank canvas, has a selection of
colors, paints, oils, itcould be chalk, it could be it
could be pencil, it could becrailes. Whatever it is you take and

(03:46):
you apply these elements to the visionand craft. You know, maybe less
than perfect. It doesn't have tobe perfect, but we can we can
get to the center ring of thecenter circles of the bull's eye and really
have a dreamy a dreamy outcome andmake that dream real. So you might
call that making informed decisions one footin front of the other. Here we

(04:09):
approach the season where I just lovethose those shows. They're going to start
popping up again, Christmas shows.I know it's pretty cheesy, but that
one song from Let's see the Yearwithout a Santa Claus or Santa Claus is
coming to town. There's that fellajust he just has a new beat,
a new rhythm to life. Isit just put one foot in front of
the other. You just got todo it one foot progressively, incrementally in

(04:30):
front of the other towards your objective. So in today's show, we want
to explain some of the more let'ssay, practical and common behavioral biases that
we see and show you some waysto take out the emotions when you're investing
and make your heart earned dollars workbest for you to help you be successful
in this retirement concept. And justlike anything else in life, the emotions
can, and often well, theycan get the best of us when it

(04:54):
comes to something in significant retirement.We want to make sure you avoid the
impulsiveness and the rash decision that couldultimately harm you, your family, your
retirement, your cash flow. You'reunemployed twenty to thirty years called retirement.
So just a few things to thinkabout, maybe even count them out.
Ten thought provoking questions James at Tieinto Today Show. Oh yeah, so

(05:15):
for starters, what exactly are behavioralbiases? Maybe some examples of what's the
snake bite effect? What's the fearof regret? How about the disposition effect?
Some of the different biases that wehave built in. That's just simply
sometimes it's easier said than done.When we tell clients to don't worry about
something, or if you say thatin a relationship with your significant other,

(05:38):
hey, don't worry about it.Easier said than done. Right, What
are some common risks that it comesto retirement that need to be prepared for?
Sometimes it's the individual me versus thecollective. We what can you actually
control when it comes to retirement,not only retirement, but also the plan
that you have for retirement? Again, the individual me versus the collective me.

(05:59):
What is our plan? How canoverconfidence and impact not just your retirement
but your investments success when it comesto preparing for retirement. What steps can
you help can you take to helptake the emotions out of your investing decisions,
maybe not completely eliminate the emotions,but to maybe mitigate or downsize or

(06:21):
to just simply control your emotions whenit comes to your investing decisions. And
then how can my financial advisor helpto control the emotions when it comes to
investings and to help build a planthat allows confidence in retirement? Greg,
Yeah, you know, rather thantalking about typical retirement topics in vehicles,

(06:43):
forming case, pensions, sold security, etc. Or even well, yeah,
even as specific as Hey, youknow what, if there's part of
your money you don't want to losemoney on, come see us. If
there's part of your money want youknow, incremental growth, some guarantees,
guarantees AGAINSTLAWUS guarantees, participation, someof the upside of the market. Come
see us. You're interested in thetwelve sixteen eighteen percent bonus, even as

(07:04):
high as thirty percent thirty five percentbonus on your money upfront added, your
money becomes your money invested over time. Now are there some are there some
limits to some of this? Yeah, there's some implied limits. Like some
are fully insured investments that create flowsof income, cash flow for life,
like a pension or SOI security check. Others will just give you a little

(07:24):
bit of bonus and some participation inthe market. How much participation about eight
percent of the upside, none ofthe downside of the SMP, even as
high as twelve and even I've seenone product out there for fourteen percent of
the upside. There's no bonus,but it's for growth and safety. We
have a little bit of everything,even market solutions. We have market solutions

(07:45):
that will, over eighteen months,allow you to participate eighteen point seven zero
percent of the upside of the lesserperforming of the SMP or the DOW.
So just think about that. It'sreally simple. It's not as confusing as
maybe it rolls off the tongue hereon radio. We can't see it,
but you can hear it well,envision it. Eighteen months later, what's
the outcome of the lesser of thetwo the S and P five under did

(08:07):
the dow whatever that result is,write it down, you get eighteen point
seven percent of that. So ifit's sixteen percent, you get sixteen.
If it's twenty, get eighteen pointseven, get it eighteen point seven of
the upside. What if the resultis negative just for whatever reason, the
market ends up lesser than where itstarted lower, right, you get none
of that one hundred percent protection tothe downside. So there's a little bit

(08:31):
of something for everyone. And youwant some quality stocks, the best companies
on the planet, best that wecan actively filter, sort through, hold
on your behalf for your investment purposes. Yes, all that's standard with us.
We will help you draft the plan, project the cash flow that you
need in retirement, get the collectionof the investment vehicles right line them all
up for your success. But thenthere's this other aspect that it's kind of

(08:54):
like the elephant in the room.But you know, it's just something you
don't map out in black and whitebecause it's kind of in the gray,
and it would be the emotional youThis is back to the biases that can
surface, the emotional driven actions andactivities that aren't necessarily good for your financial
health. So let's look at sheddingsome light on those emotions. People come
into our office and they think theyhave a retirement puzzle solved. Well,

(09:16):
they believe they know how to timethe market. Here's timing the market for
you. Are you ready? It'sabout time in the market, not timing
of the market. It got itgood, that's a fact, and that
will serve you well. And wewant your plan to serve you well.
So making every right decision when itcomes to your money is a byproduct of
a number of inputs. And it'snot to say it is it possible to

(09:37):
get everything just right. I guessyou could buy serendipity get it all just
right, But it's a collection ofmost probables all bound together to become a
highly probable outcome. That is thesuccessful you opposed to seeing people make rash
decisions, because letting emotions get thebest of you will equate to making those
types of decisions too. So todaygoing over some these behavioral biases common as

(10:01):
they are across all age spectrums,including those nearing retirement, already retirement,
when a state's ex sens or retired, et cetera. So we'll give you
a few tips as we go along. And some of the bias is to
avoid that can affect you. Well, here's an example. Maybe the most
common bias that we see and hearabout is people who think that well,
annuities are bad across the board.They think annuities are bad, and yet

(10:24):
at the same time they think socialsecurity is good or pensions are good,
when in reality, social security,pension, annuity, they are all forms
of annuities. It's just a matterof who administers that particular annuity product.
Is it the federal government, socialSecurity? Is it really tied to your
your company plan, which is typicallya pension, or is a private insurance

(10:48):
company, which is what we thinkof as just regular annuities. And again,
there's good, bad, and uglyfor all of these different items.
It's just as a matter of doesit fit in your overall retirement plan.
Yeah, James, on that subject, Any clients out there of ours,
you're curious about annuities, give usa call. If you're out there and
been to dinner seminars and someone's pitchedyou an annuity and you're curious about it,

(11:11):
give us a call. Don't callan insurance agent call Financial Findiary to
sort out what's best for you andto get you lined up with your success
on purpose, not for a commission. Check all the right, There's much
more. Our fund number five one, three, five, seven, nine
to sixty five four calls picking up. But stay tune. You're listening to
the Semi investment show with Brown FinancialAdvisors here on fifty five KRC Detalk Station.

(11:31):
Opinions expressed are solely those of BrownFinancial Advisors and should not be interpreted
as specific advice. Materials presented arebelieved to be from reliable sources and no
representations can be made as to itsaccuracy. All ideas and information should be
discussed in detail with one of ourqualified investment advisors prior to implementation. Market
based investments involve risk, and pastperformance is no guarantee of future results.

(11:52):
Insurance based investments offer guarantees based uponthe claims paying ability of the issuing company.
All insurance, tax and mortgage servicesare offered through Brown Insurance and Tax
Advisors LLC. Brown Financial Advisors andBrown Insurance and Tax Advisors are affiliated companies
and may only transact business in thosestates in which registered or were otherwise legally
permitted. Welcome back to the SoundMany Investment Show with Brown Financial Advisors.

(12:15):
I'm Greg Brown and I'm James Bortham. We are an independent RIA. That's
our registered investment advisory firm. Wedo our front clients, not companies.
That's Main Street and not Wall Street. Our fun number five one, three,
five, seven, five nine,sixty five to four. Website Brownfinancial
Advisors dot com. Email share yourthoughts to team at Brownfinancial Advisors dot com.
And our home offices in Milford,but we also have locations in Blue

(12:39):
Ash, Westchester and Florence. Greg, you know, just looking at our
topic here, how behavioral biases canaffect your investment success. Let's look at
the word bias itself. Your sourceof financial services and information, your source
of advice matters is financial fitisharies.We approach each situation that being yours without

(13:01):
a bias. The bias is,if there is any bias, it's for
your success. What tools, techniques, approaches, strategies and overall planning products
too are going to align well andbest for your outcome, your desired outcome.
So along those same lines, ifit comes down to an insurance product,
are we licensed to do so?Do we have a solid survey of

(13:22):
the land and understand all the productsare available and how they fit and how
they work. Yes, as licensedand certified in many areas including insurance,
to and financial planning, etc.As a team really robust and deep when
it comes to licensure certifications. Thiscan mean the difference for you falling short

(13:43):
or just cruising through and being successful. Is mentioned when it comes to safe
money solutions fully insured solutions. Ifyou have an annuity product or life insurance
product and you're wondering if you shouldhave it at all, or if you're
considering the purchase of an annuity orsome kind of fully insured solution for your
investments, your investment and savings accounts. You've seen TV ads, commercials,

(14:07):
you've heard radio, you've seen thirtyminute TV programs on local TV stations.
You've been to live presentations at dinnerseminars. Please buy or beware. You
may find that some of these elementsor components or characteristics of annuities are very
appealing and they are for the rightpurpose. An annuity can be something that

(14:28):
only the annuity can solve. Fora fixed or fixed indexinuity that has no
market risk, but be careful thatit's not just any annuity is best for
you. The annuity that's best foryou is the feature rich annuity that's high
on feature, high on solution,low on commission. Don't be buffoon or
bamboozled by insurance agent acting like financialadvisors. It happens every day. You

(14:54):
need a real financial advisor who's holisticcan help you with all aspects of your
financial decisions, including the proper reviewassessment of any annuities you currently have with
higher interest rates it might be replaceableand upgradeable, and or if it's your
first endeavor, first dive in theold pool of owning an annuity, you

(15:15):
want to own the right one.They're longer term solutions. You don't step
in it with eyes anything but wideopen. We want to help you make
the best decision, so we're qualifiedto help you in that, and we're
skilled, and we're also having acertification that's to represent your best interest,
meaning a fiduciary standard. It can'tbe just any solution we throw at you.
It needs to be the one wedeem the best of amongst other peer

(15:37):
group solutions for you to own,not for what it pays us, but
what it provides you. So giveus a call, will fully assess your
current situation to a portfolio review.See what you're holding while you're holding it,
Align everything back up, make recommendations, not hold anything back. It's
complementary. Even your questions about whateveryou think you're hearing and think you're seeing
in the marketplace. We're here toserve you publicly. Just give us a

(16:00):
call and help you assess exactly whatyou're dealing with for your best outcome.
So again, consider the source someonewho is only licensed to provide insurance advice,
not certified or licensed to give investmentadvice. Keep that in mind if
that's who you're listening to, whatthey're actually licensed to sell you versus what
they might be advising or trying toadvise you on. Samoth A banker,

(16:23):
a broker, an advisor. Youneed to be. An advisor can help
you with all things and make senseout of the different investment choices. They're
like bullets in a gun. Youwant to have each bullet loaded up for
the purpose, for the right target, the right outcome, and then fire,
ready, aim, fire and anotherone greg those who are captive versus

(16:45):
they are independents. How about thatone, well, captive, you know,
it's just one of those things thatyou're not going to You're not let's
say you need a solution like allState has, but you're sitting in front
of a state Farm representative to getall stayed at State Farm, right,
You're not going to get oftentimes theright solution that you may need if it's

(17:07):
not something the mothership has. Theadvisors slash a salesperson sitting in front of
you if they don't have that intheir toolkit because they're not allowed to.
You're in a captive environment. You'regoing to get what they got and then
guess what you've been gotten? Whateveryou want to say, you need what
you need, wouldn't you agree?So where do you go to get that?

(17:27):
A place that can actually provide itthat's not limited in any way.
That would be us. We workfor you the entire you know, the
wide, big wide world of solutionsthat are out there can be our toolbox.
We'll reach in and take out thetool you need for the right purpose.
So watch out for just captive doesn'tmean what they offer is bad.
It just may not be what's bestfor you. And wouldn't you want the

(17:49):
best for you. Yeah. Here'shere's maybe a summary of the conflict of
their interest. It goes like this. Those who are captive, their number
one client is the mothership company.They work for the company, right.
Those who are independent, you arethe number one client. That's the big
difference. You're the boss, allright. Now, going back to emotions

(18:11):
and why that's sometimes hard to dealwith, especially when it comes to your
money. We hear this once ina while when the markets are doing what
they're doing, especially in times ofvolatility, is we'll hear this, I
watch my investment accounts every single day. Now, that might be true,
but we only hear from the clientswhen the markets are not doing quite as
well as what they would like orwhat they've anticipated. So and that's kind

(18:33):
of this quiki wheel syndrome, ifyou will. But when markets do drop,
sometimes significantly drop like they did intwenty twenty two, or go back
to March of twenty twenty, orhit the way back machine to twenty oh
eight, that's when fear sets in, or that's when fear maybe takes over.
Now, the two main emotions thatdrive our decision, seemingly in the
markets are fear and greed or greedand fear, depending upon what comes first

(18:56):
what comes second. Now, themost ccessful investors are the ones who don't
let these two emotions control their investmentdecisions. Sometimes we have to remind ourselves,
like, when is the best timeto go shopping is when something's on
sale. That's when the best timeto buy something is when it's on sale.
Now, understanding when it's on saleversus just simply Hey, my market

(19:18):
accounts lost money today. I don'tlike it, and I'm not handling that
well. It's causing me not tosleep all at night. Those stomach acids
are just turning and I'm just notreally handling it. Well. That might
also be an indicator that you're takingon too much market risk. Sometimes that's
really the root of all of theseproblems is that you have too much money

(19:41):
of your nest egg at full marketrisk and you're not wired necessarily to handle
that. Think of it as thatcommercial for like a sleep number bed.
Everyone has their sleep number, rightapparently, Well, the same goes with
market accounts. Everyone has their risknumber when it comes to their market based
accounts. Is your risk number andyou know, just to kind of put

(20:03):
this, you know, type itinto a bow and put this into another
category. Is come see us ifyou just want to simply learn more about
not only yourself but also your investments, what you own, maybe why you
own it. So call us.It's a complimentary consultation. Five one,
three, five, seven, fivenine sixty five four call us we can
help Greg. You know, whenthe market's up, you can't capture the

(20:26):
exact highs of the market. Youcan't time predict and capture the highs,
at least not consistently correct. Andthen by having a good mix and diversified
stocks. Let's say in this typemarket that owning some of the best companies
on the planet ongoingly over time,that works quite well. And then is
those cycle lower? You know thosethose companies good companies are active managers.

(20:48):
We find great companies on sale,We want to buy those when they're down.
Volatility gives us the opportunity to buygreat companies lower at a lower price.
So you don't capture the lows unlessyou emotionally react to markets and you
sell when it's down because you can'ttake it anymore. What'd you just do?
You captured the bottom. You nowown the loss because you sold a
loss Otherwise you're just cycling up anddown. You know you're up and then

(21:14):
you sell, you capture a gain. You're low and you sell, you
capture the loss. They are realjourneys about a diversified mix of actively managing,
owning the right things for the rightreason over time, cycling through rewaiting,
making substitutions here and there, andthen time. What is the average
rate of return? It's somewhere betweenthe highs and the lows. So that
means you need to be in forall cycles of the market to get your

(21:37):
average rate of return, which wouldbe somewhere in the middle. Your wealth
will build over time in doing so. So what does it take to get
an average rate of return over time? So it's time in the market.
Again, it's not timing of themarket. Well, the timing kind of
goes like this too. When peopleare timing and not doing a good job
of timing, they sell when themarket is down, they've gotten out,

(22:00):
and then they missed the rebound whenthe market comes back up, and only
after it's come back up do theyget back in. So, in essence,
you they have lost twice in thisparticular example, because you captured all
the downness of your investments of themarket, and then you missed the rebound,
You missed the upside growth of whatshould have been part of your investments,

(22:21):
and instead you only got back inafter it had come back up,
and then you rents repeat this wholecycle all over again. Anyways, there's
more, there's much more off underabout the office. Five one three,
five seven, nine, sixty fivefour calls We can help, but stay
tuned listening to the Sound Money InvestmentShow with Brown Financial Advisors Here in fifty
five KRC Detox Station. Welcome backto the so Many Investment Show with Brown

(22:48):
Financial Advisors. I'm Greg Brown andI'm James Orton. We are a registered
investment advisory firm. We are independent. We do work for clients, not
companies, and it does all startwith the plan. That means actually having
a plan, knowing what you ownand why you own it. So,
whether you're seeking advice on old fourone K four three b IRA, rollover,
investment planning, retirement planning, incomeplanning, tax planning, social security

(23:14):
maximization, are Roth conversion analysis,INNUA analysis and for some perhaps even in
service rollover. All those and morewe can help. Five one three five,
seven, five nine, sixty fivefour. Visit our website Brownfinancial Advisors
dot com, email share your thoughtsto team at Brownfinancial Advisors dot Com and
our home offices in Milford, BIP. We also have locations in Blue Ash,

(23:36):
Westchester and Flauren Shaw. All Right, behavioral biases can affect your investment
success. Let's jump into some ofthese. Understanding that market is volatile,
so that's most everything else going onin the world around us. So this
gives you all the more reason thatyou want to start being proactive with your
retirement plan so it can withstand thevolatility that the market, our country,

(23:56):
and the nations on this planet mayface in the it's current and foreseeable future.
It's always something going on somewhere,right, even if it's at home.
Well, the common investment behavioral biasesbehavioral biases, you know, potentially
damaging behaviors typically caused by inaccurate decisionsit comes to investing. These emotions can

(24:17):
have a huge impact on investment success, not only during your working years,
but also during the retirement phase ofyour life. So going through some of
these biases, we see that youknow some you might be familiar with,
others less so, and if you'relistening out there, you may even be
guilty of a few of these andcan look back and say, yep,
that's when that happened, and yep, that's when I did this and that.

(24:38):
So our point is just to makeyou aware of all of them,
remind you of some of them,how to overcome basically all of them,
and want you to be successful inthe retirement. So you might look at
this The big one, number onethat affects emotions, behaviors in these biases
would be something called overconfidence, justlike it sounds, simply thinking that you
have better information or better interpretation ofinformation than others do or even over those

(25:04):
are the experts, And keep inmind, no one's perfect, including the
analysts and the experts. But it'sunlikely that the average investor will have better
information with their own sources and analyticalskills than the experts. And you know,
oftentimes you'll find yourself chasing returns insteadof capturing them, and you'll end
up being a daily and a dollaror two short. So you know,

(25:26):
just keep that in mind that youcan be overconfident on the basis of what
you believe you know in the informationyou have. Here's another one that we
see and hear quite often is fearof regret. Now just kind of like
putting a I'd say the description onthis one is, this is where people
hold on to an investment. Typicallythis is company stock that we see when

(25:48):
they have inside their company plan,like a four to one K for example.
But when the market has taken andyour portfolio is down, particularly this
particular stock that you might be holdholding onto to the extent that you want
it to rebound so that you canthen sell it without regret. So this
is i'd say this is most commonagain when people have inside of their company

(26:11):
plan, they're holding onto company stockand they are just believers in that company,
and they just know it's going tocome back, right, It's got
to come back. And then afterit comes back, when it gets back
to a break even, this ismaybe a form of gambling too, is
the gambler who wants to break evenbefore he cashes out. So maybe just
a reminder about the long term goalof investing is not just to buy and

(26:34):
sell stocks at favorable points. Thegoal is to build wealth over time.
Keep that in mind, because anotherone that we see quite often is the
seeking of pride, and really thisis the opposite of the fear of regret.
This is when you sell the investmentsimply to experience the joy or the
pleasure of maybe boasting how much youmade on it, hindsight of course being

(26:57):
twenty twenty. But let's give youan example. Let's hit the way back
to a machine to nineteen ninety seven. Someone who had purchased Amazon stock at
their IPO, at their initial publicoffering, and then they sold it for
a quick twenty percent gain, whichis not bad. That's what you'd like
to see for all of your investments. If you can average a twenty percent

(27:17):
gain over time, that'd be phenomenal. Right now, in this particular story,
again using hindsight, right, insteadof taking that quick twenty percent gain,
you hold on to that Amazon stock. Twenty five years later, your
portfolio that ten thousand dollars has grownto five million dollars. Yes, I
know that's kind of an extreme example, but that's what's happened to people over

(27:40):
time, over different periods of time. At least greg any thoughts, Yeah,
you do see that. And insome stocks you hold on to for
a long time, others you goin and out. And you sell when
they meet certain targets. And thisblending is a blending of strategies for specific
outcome. It's intentional. That's thepoint an expert level approach to an intentional

(28:02):
process, a strategy and methodology.A repeatable one is the difference excluding emotion.
So another here would be house moneyeffect. Now that's equating gains as
winnings and taking larger than normal riskssince they were market driven additions to your
original investment. Taking those larger risksof jeopardize your gains and possibly turn those

(28:23):
gains to losses. So the housemoney effects. It's kind of like if
you're sitting at say you were toplay blackjack and you had one hundred dollars
and you cause that to become onehundred and twenty dollars through serendipity and luck,
you're twenty dollars ahead. At somepoint you put your one hundred dollars
away and you start gambling out ofthe twenty. Well, if you start

(28:44):
a cycle, you might feel goodabout playing with the house's money, but
when do you resist the urge toadd a little bit more in it?
And when do you resist the urgeto truly take those winnings away and deployment
something safe. Meanwhile, what didyou do with the money that you originally
invested and now sitting in your pocketdoing nothing. It's the whole picture of
what you do with all buckets ofmoney aligned to a purpose, aligned to

(29:08):
an outcome. It nice to becontributing to what you want it to do.
Stagnation is not as not a strategysnake bite effect. Here's another.
This is being willing to take onthe risk or avoiding, say unwilling to
take on a risk, or avoidinga particular investment once it's dropped in value,

(29:29):
it's just you know, been there, done that. I'm not trusting
that one again. When it's notan emotional thing. This is an animate
object. It doesn't have a pulse, it doesn't have a conscience. It's
not out to get you. It'snot vindictive, it's not euphoric. It's
just it is what it is.It's an investment. There are metrics to
an investment, there are fundamentals tothe investment. There's a reality and a

(29:52):
fact based assessment to be made toapproach and to expect an outcome. So
the downside of a waiting investments thathave dropped in value, possibly missing out
on the future potential of it goingback up just because you wouldn't buy that
particular investment in inordinately or nice,welcomingly lower priced just because you had some
history snake bit effect avoid it.Well, here's another one that's a very

(30:17):
issue on the snake bit defect.And if you go back to I don't
know what decade it was when theshow he Hobs on TV, and one
of the songs to refrain was ifit weren't for bad luck, I'd have
no luck at all. Why Ibring this I don't want to sing,
but anyways, why I bring thisup? This because we hear this from
time to time from investors who say, well, just because I bought this

(30:40):
particular stock is why it's going down. They have this own this mentality of
they're the ones who somehow control theuniverse, and because they are the ones
who bought this particular stock or intothis particular fund, that's one is going
to go down in value. Nowthat's not actually true, of course,
because none of us actually control theuniverse. It's just sometimes it's a semi

(31:03):
humorous way of people's emotions thinking thatthey somehow are the effect or the cause
of the effect of that particular itemgoing down in value. Greg any thoughts
on that, yes, other thanwe have a guy last name's Murphy works
with this, maybe we should haven'tchanged his last name to avoid the Murphy's
law effect. That's not one ofthese, is it? No? All
right, so here's no one tryingto break even? And again this is

(31:26):
recouping losses, or at least attemptingto recoup losses quickly by making a high
risk investment, which is another waysaying, don't throw good money after bad
by taking the unnecessary risks which couldresult in greater or double your losses.
A reference point. We see thisfrom time to time where people just they
assign a particular selling point to astock, which you know, by the

(31:48):
way, this is not necessarily abad thing, but it is a thing
that sometimes can limit your upside andalso can limit your downside. If you
pick a point that says, well, if it reaches this particular value,
you that's what I'm going to sell. And you know, again it can
be a good thing. It coststo be a bad thing. Familiarity deals
with people investing only in companies orcities, municipalities, other entities such as

(32:14):
that in which you're only familiar with. And this happens often and can be
okay for some of your money.Again, a portion of your portfolio,
but not all of it. Sowhy only a portion it because you might
be passing up other investments or assetclasses that have better potential. Greg Yeah,
the old cliche familiarity breeds contempt.Don't let it set in. I'm

(32:37):
thinking about trying to break even.That there's a difference between trying to break
even and trying to get even.That's a Kenny Roger song, by the
way, Yes, of course itis. I think he covered a wide
range of emotions during his career.Let's see. How about some mental accounting.
This is classifying investments by accounts suchas retirement, education, I RaSE

(32:59):
for cas et cetera, instead ofasset classes. You're looking at it too
high level. In other words,it's important to keep all of your accounts
in mind, of course, andmanage them as one large portfolio with the
proper coverage. Kind of like yourportfolio at large is your household. Your
household should have a certain recipe aboutit in a design So therefore, you're

(33:23):
not looking at it like what myhouseholds made up of cookies and ice cream
and milk and coffee. It's mademore up of Nope. I just have
a retirement recipe of success made upof specific ingredients. Those ingredients are asset
classes. There are specific holdings ofdifferent stocks, bond, fixed income collections,

(33:43):
maybe some annuities and some cash,all put together in a plan.
That is the overall recipe that willtaste mighty good. And that's the way
you want it. So it helpsensure that the proper diversification amongst all the
components that are needed, limit andreduced redundancies overlaps which are inefficient and costly
and can increase risk and lower return. All right, good time for a

(34:04):
break our fun number five one,three, five, seven, five,
nine, sixty five four call swickingup, but stay tunered. Listening to
the Sound Money Investment Show with BrownFinancial Advisors Here on fifty five car se
Detok Station. Welcome back to theSound Money Investment Show with Brown Financial Advisors.

(34:24):
I'm Greg Brown and I'm James Boorthree are an independent RIA that's a
registered investment advisory firm. We doour for clients, not companies that's Main
Street and not Wall Street. Ourfun number five one, three, five,
seven, five nine sixty five four, website, Brownfinancial Advisors dot com,
email team at Brownfinancialadvisors dot com,and our home offices in Milford,

(34:45):
but we also have locations in BlueAsh, Westchester, and Florence. Greg
Well. Continuing down some behavioral biasesthat can affect your retirement success, we
got down to the the actual nittygritty of these, gone through several kind
of left off right after mental accounting, jumping into something called representativeness. Representativeness,

(35:07):
What on earth is that sounds likeativelike taters. No, it's associating
these specific characteristics as representative of futuresuccess or failure, such as equating a
good company with a good stock.Not all good companies do well in stock
market, right, It's important tosee the whole picture in order to make
informed investment decisions, because if youthink about it, that is really clearly

(35:30):
a form of bias. You justsay it's a good company, good stock,
or maybe just because you like it, maybe you like their brand,
their logo, maybe you use ityourself, which isn't a bad indication of
an investment choice. That shows thatyou know it's consumable of which you're a
consumer. But if you know alarger peer group, a larger herd mentality

(35:50):
of using the goods and services fromthe company you like or you quote unquote
dig, then that that could bea good indication. But if it's just
very esoteric, what out that's toothin, too shallow, and move on.
Here's another one called the endowment effect. The endowment effect is when you
place extra value on investments that youalready own and you kind of feel a

(36:12):
personal sense of loss or maybe it'syou feel like you might have been wrong
if you invest in something and youdon't want to give it up, because
again that's admitting that you're wrong.Keep in mind that the investment that means
the stock, the bond, themutual fund, the ETF, it doesn't
know that you actually own it.It doesn't care, so to speak,
and don't fall in love that yourindividual investments is really the bottom line on

(36:35):
this one, be willing to moveon. That means so if the price
is right or the time is right, to seek and find better investment opportunities.
Another one is called the disposition effect. This is when we react to
the media noise or the different typesof what we see in reading here,
on the TV, the internet,etc. About company specific news, but

(36:55):
neglecting to react to the macro economicdevelopments that are going on. And again,
this type of behavior does lead tobuying and selling investments at the worst
possible times. It seems like,think about it, any news on investment
that you read, that you seeon TV is likely, in fact,
very likely already been factored in pricedinto the investments, so by time you

(37:20):
see it, you react upon it. That's the key is you're not really
acting, you're reacting to that.Imagine if George Carlin had a skit on
the emotional expressions of an investor whohad bias. I could just see it
and hear it. He did havesome kind of skit. I was too
young. I probably wouldn't supposed tobe listening to him. I don't know
if my parents ever knew that Ihad listened to this man, but you

(37:45):
know, I just remember him sayinghappy. They make these faces, sad,
excited, worried, anxious, andwith that he just had quite the
body language going on and it washilarious. And these are forms of emotions,
all of these that drive a aspectof bias in all the wrong directions

(38:07):
when it comes to you and yourmoney. So there's a thought I might
look that up and see if that'sthe way I remember it. But behavioral
biases and retirement risks, well,let's look at that. Okay, Are
they common? You bet? Wedo not expect you to be perfect us
perfect to anyone perfect, But Ineed to learn to avoid the biases.

(38:30):
You're kind of getting that as atheme. Understanding controlling emotions and the biases
we have when it comes to investing, well, it can help avoid some
of the missteps that can harm performance, as well as falling short of your
goals, meeting, exceeding or fallingshort. Which do you want? So
when making the investment decisions, weall need to understand more than just the

(38:50):
emotions and bias. We need toknow what the objectives are, what the
goals are, what your tolerance is, the family needs, the incompanies,
the time horizon, dealing with thenyou know so forth. These are the
components of ingredients that make up avery successful plan. We backfull in what
meets those pseudo questions? You know, income needs question mark, family needs

(39:12):
question mark? Get it? Wecomplete the question with an answer that formulates
by ingredients the recipe that is youroverall plan geared towards success. So to
build a cohesive plan, you morethan likely don't want to, let's say,
not try to figure this out right. And you don't want to figure
it out on your own because sometimesyou don't know the right questions. It's
kind of like the old autage,you don't know what you don't know,

(39:35):
But we do it every day.We pretty much know what you need to
know about this, and that willincrease the odds and the probability of having
a huge amount of success along withthat. So there are risks that you
need to certainly be aware of inretirement and you have to account for these.
You must account for these as partof your retirement plan, or you're
dealing with an incomplete plan. Canyou imagine, as let's say, a

(39:57):
pilot with a you know, let'ssay two hundred passengers on a jumbo jet
and they're all lives in your hands. Some people refer to the number of
people in their plane as the numberof lives on their plane. And you
just don't have a complete set ofinstruments, You don't have a complete radar,
You don't have radio connection that's consistentwith the tower and your copilot is

(40:22):
was that disease where people can't stayawake, a narcoleptic or something. You
just have a lot working against you. This is like you not having the
complete completeness of what you need foryour retirement. Just don't do it that
way, please. Well, here'sanother risk that we see quite a bit,
and think about this longevity risk.And yes, life expectancies now the

(40:45):
rate of increase may have slowed downdramatically, as far as the post pandemic
about life expectancy is still going up. Still increasing, medical advance is still
improving. All that's tying into thefact that, yes, there's many people
who different. Well, I'll notget into the politics of this just yet.
I'll just simply say life expectancies havekind of plateaued here in the last

(41:07):
couple of different years. But thatstill means that many retirees today could easily
and here's where it could be thegood or the bad, or the ugly.
You might be enjoying twenty five tothirty years of retirement, or you
might be attempting to survive twenty fivethirty years of retirement. What's it going
to be. Is it going tobe something that you're enjoying or just attempting

(41:28):
to survive? Another risk, bigrisk recently is inflation risk. Depending upon
who you ask or where you look, inflation's gone up, according to a
government, less than four percent fromlast year to this year or to next
year. Right now, if you'reactually buying bread, egg's, milk,
other types of groceries are paying differentexpenses, you'll find inflation has actually gone

(41:49):
up more dramatically than that. Sowhat exactly is the impact or the effect
of inflation? It really means this, the purchasing power of our dollar has
gone down. How much has itgone down? Is it just three or
four percent or is it more thanthat? And is it always uniform across
all different sectors of the economy.And of course the entwer to that is
no. In different sectors, sometimesinflation or the impact of inflation is much

(42:15):
more dramatic than others. So whenit comes to health, insurance, property
taxes, many other types of assetsthat we are purchasing in our lives,
their prices will definitely go up overtime, but sometimes they'll dramatically jump up
from one you're to the next,and that's where your plan, your financial
plan, your retirement plan needs toat least take into account the impacts of

(42:35):
inflation greg most certainly and looking atanother one, volatility risk. This risk
in particular, of course, itrelates to most of the previous emotions in
some way or another that we've beendiscussing. But as you get closer to
retirement, the amount of volatility youallow in your portfolio and what you want
it to take on is probably significantlyless than when you started working, and

(42:58):
that one would hope in this quitetrue, doesn't mean you eliminate all risk,
and for some it may. Itmay mean you limit some risk,
just some risk, and others atleast half the risk. So just some
things that need to be worked throughbased on all those other criteria of what
your needs are, cash flow needs, the investments you have to work with,
your actual risk tolerance and your timehorising. So coming back to that,

(43:22):
you know you never can leave thosefundamentals. But everyone's situation is in
fact also different, so we needto plan for that difference in your life.
The golden rule or good rule ofthumb here is that the less cushion
you have or the less money orincome sources you have for retirement, the
less volatility you can handle. Ifthat makes sense, you know you just

(43:43):
if you're going to cut it tooclose, you might need more safety.
If you've got most things in lineand it is good, you can take
on a little more risk because youdon't have as much dependency on it.
There's just so much we can considerand work together and as complimentary. So
give us a call. We'll sessyour situation and help you out. For
sure, there's more. There's muchmore. Our funder bur at the office.
Five one three, five, seven, five nine sixty five four Again
five one three, five, seven, five nine sixty five four call us.

(44:06):
We can help now on behalf ofGreg myself, James, thank you
for listening today. Have a greatweek week, and remember this sound money,
where good things are believable, achievableand true for you
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