Investing without emotion: It’s a process
We are hearing a lot of worried investors out there. And for good reason...stock markets have been up for the better part of 9 years and interest rates are rising. All of this while, after a brief hiccup in February, the market marches higher and volatility (VIX) is very (artificially) low again.
It is making people nervous and when people are nervous they are emotional.
Quite often, when we become emotional we make irrational decisions, especially when it comes to investments. Simply, emotions hurt investment decisions. Behavioral finance theories suggest that emotions and psychology cause us to behave in unpredictable and irrational ways. Why buy high when you know you should buy low? Because you panic. Your emotions and anxiety lead you to make poor decisions but the awareness of this will give you an edge.
How do you efficiently remove emotions from the decision making process? Rules-based, process-driven, scientific approaches. Process-driven investments remove emotions from investing as they don’t fight market trends, they follow them. These strategies are designed to act rationally through volatile times (like 2008) and hence have historically performed well at these times. It should give investors confidence that in times of volatility and emotion that part of their portfolio is actually set-up specifically for that situation. There are no guarantees, but rules-based strategies create processes that permit you to remove emotions from investing and benefit by sticking to the plan.
Would you bake a cake without a recipe? Would you build a car without an automated assembly line process? No. It would be far too inconsistent. So why invest without a process?
For more about the Auspice philosophy and performance history, please give us a call.
IMPORTANT DISCLAIMERS AND NOTES
Futures trading is speculative and is not suitable for all customers. Past results is not necessarily indicative of future results. This document is for information purposes only and should not be construed as an offer, recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. Auspice Capital Advisors Ltd. makes no representation or warranty relating to any information herein, which is derived from independent sources. No securities regulatory authority has expressed an opinion about the securities offered herein and it is an offence to claim otherwise.
For U.S. investors, any reference to the Auspice Diversified Strategy or Program, “ADP”, is only available to Qualified Eligible Persons “QEP’s” as defined by CFTC Regulation 4.7.
For Canadian investors, any reference to the Auspice Diversified Strategy or Program, “ADP”, is only available to “Accredited Investors” as defined by CSA NI 45-106.