Broken Pie Chart

Why Do Investors Make Such Poor Decisions Sometimes?


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Recently I found several different research pieces showing how at the very lows of the Great Recession in 2009 the percentage of funds in money market funds was at its highest. In 2009 the fund flows to bonds were greater than the previous 5 years combined. So why with equities so cheap did people stay in cash or bonds? Wouldn't they want stocks when they were cheaper? This highlights how investors who panic an make rash decisions can do so at the very worst times.

Why do investors panic?

How does fear guide investor decisions?

Percentage of funds in money markets spiked at time of March of 2009 lows

Why investors didn't rebalance out of bonds and into stocks during the great recession

2009 fund flows were a record year for bonds

How using Buffered or Hedged Equity Strategies can help reduce fear and irrational choices

Benefits of staying invested while hedged

Why now is a good time to be hedged

Mentioned in this Episode:

Contact Derek www.razorwealth.com

Morningstar Bond Fund Flows 2009 Chart https://morningstardirect.morningstar.com/clientcomm/2009.pdf

Dalbar Quantitative Analysis on Investor Behavior Report https://www.qidllc.com/wp-content/uploads/2016/02/2016-Dalbar-QAIB-Report.pdf

Podcast talking about markets within 3% of all-time highs 36% of time https://podcasts.apple.com/us/podcast/fear-investing-surprising-data-points-to-markets-near/id1432836154?i=1000443860686

Why diversification fails https://podcasts.apple.com/us/podcast/ep012-does-diversification-alone-reduce-systematic/id1432836154?i=1000423615813

Buffered Equity Strategies https://podcasts.apple.com/us/podcast/adding-downside-buffers-to-investment-portfolios-using/id1432836154?i=1000419699076

Why investors need a hedged equity strategy https://podcasts.apple.com/us/podcast/why-investors-need-a-protective-hedged-equity-strategy/id1432836154?i=1000418366567

Derek Moore's book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr

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Broken Pie ChartBy Derek Moore

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