On The Money: Investor Behavior and Preparing for Retirement Success

January 23, 2018 | Paul R. Ruedi CFP®
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On this episode of "On the Money," we discuss investor behavior and ways to prepare for retirement success.

On Investing and Human Instincts (9:57)

What I figured out a long time ago – it’s the way humans are wired – since we were cavepeople we were conditioned to move away from pain and move towards things that bring us pleasure. Higher returns of one asset class, like stocks, brings us more pleasure than our returns on our bonds.  Some people might even say the returns of bonds the last 7, 8, or 9 have been painful – and want to move away from that suddenly.

- Paul A. Ruedi


On Cycles of Investor Behavior (10:45)

You want to talk about extremes in investor behavior – from about 1995-1999 – about 5 years in a row, the S&P 500 went up 20% or so year after year.  The more volatile, technology-laden Nasdaq was going up 30 or 40% per year.  A broadly diversified, global portfolio at the time provided returns around 12% or so.  Now normally people earning 12% are ecstatic – but when a “no-brainer” (S&P500) index fund is earning 20% a year – it’s hard on everybody emotionally.   So I’ve been through that period

I’ve been through the other side in 2008/2009 when everybody thought the world was coming to an end and everybody was saying sell everything while you still can – and of course, anyone who has listened to the show through all these cycles knows I’m pretty much steady – saying “this too shall pass.”

In 1999 when people said “this time is different” – that’s the 4 word death song of investors – I used my 4 words of “this too shall pass.”  And I did the same thing in 2008/2009.  Of course investors, just being normal human beings in the face of crisis – unprecedented crisis in most people’s lives – naturally wanted to move away from what was causing them pain – the returns of equities – the negative returns of equities – towards the comfort of bonds. 

- Paul A. Ruedi


On the Purpose of Investment Returns

Just having a higher return is meaningless – unless you have a goal that requires it. 

- Daniel Ruedi, RICP®


On Fear of Missing Out (13:03)

There is just a human condition that people have an immense fear of missing out on something.  When you’re looking across the fence, or looking at your neighbors, and you see that other people could be doing better than you - the fact that you may not be reaping some of the same rewards of how the market is doing at that time because you have a plan that is built for the long-term can make it very difficult to stay the course if you don’t have someone there to guide you through and give you the reasons you are invested.

- Ryan Repko


On Chasing Returns (21:00)

You see how suddenly this tide of money, after 6 or 7 of the best bull market years, are suddenly starting to swamp the boats (into stocks).  When I was writing newsletters in 2010 - 2012 I was writing about remaining bullish and not being bullish enough – we’re kind of starting to get on the other side of that – and that concerns me a bit.  But then again, it may concern me, but it doesn’t change the way that we invest.

- Paul A. Ruedi


On Saving Diligently (28:15)

Every successful retiree I know tended to have one thing in common: they were diligent savers.  And that was a result of sensible spending.  There are kind of two sides to the same coin: you show me someone who was a good saver I will show you someone who was somewhat frugal; you show me a person who is just naturally somewhat frugal, I’m going to show you someone who probably had a little heavier savings and a little heavier lifting from their savings than the average person.

It seems to be no accident that people who get really great retirements with a 5 in front of their age, or in their early 60’s had that common theme.

- Paul A. Ruedi


On the Cost of Keeping Up with the Jones’s (33:30)

It’s really easy to get caught up with what other people have or what other people are doing.  Now that I have a grasp of the numbers, I see people with the newest cars and trading up to new houses, and realistically, they are not saving enough

- Daniel Ruedi, RICP®

I think what we see a lot of now are people who are “Facebook wealthy” – and you see them going to purchase new things or going on fancy vacations – and eventually you assume gosh they must be doing so well financially because look at what they are capable of doing.  You’re not considering that chances are they are not saving at an appropriate rate that they should be to afford this lifestyle.

You start to think, other people are doing it, maybe I’m being too conservative, and it starts to unravel.

- Ryan Repko



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It’s important to recognize that past performance is not an indication of future results.

You should not make any investment decisions without first consulting your own financial advisor and conducting your own research and due diligence.