People are not robots

Time for Wall Street to Produce Products for People, Not Robots

Investors have a tendency to unnecessarily intervene and rebalance their portfolios, which often results in long-term underperformance (see chart below). As Morningstar has eloquently put it, investors “suffer[ing] from poor timing and poor planning … many chase past performance and end up buying funds too late or selling too soon.” The classical industry response to investor fiddling is a combination of both advice and product. The advice side often starts with a financial plan delivered by a trusted financial advisor. This plan is a long-term strategic document that outlines an investor’s financial objectives and the investment products he or she will use to achieve them. ….[READ]