Image Credit: An MBA Diary ( http://bit.ly/2rfP8Fg)
First and foremost, we hope that you and your loved ones are safe and doing well.
This global event has produced and disseminated information on a scale never seen before. The actions we take as a result are determined not only by the information itself, but the medium in which that information is delivered. We have already begun to see disparate opinions form as a result of people’s political associations, demographics, personal experiences, and countless other variables.
We use these “frames” to create or confirm narratives that can help us to rationalize what is happening. Appropriately this is referred to as framing bias. How information is framed impacts how that information is perceived. Which, in turn, impacts how people make decisions. This is true in how we make decisions within our own lives but also in forming our perception of how our portfolio should be managed. Our perceptions based upon prevailing information and framing, at times tend to lead us to be overly optimistic or overly pessimistic. Unfortunately, neither is objective and tend to guide us to do what "feels" best. It is said in times of crisis, the first casualty is perspective.
In the past weeks we have seen the markets fall after the Fed announced stimulus measures aimed to bolster investor confidence. Then, inexplicably, the market rallies when unemployment data was released showing historically high figures. How does that make sense? The truth is, attempting to explain why things will or have happened expands the opportunity for our biases to take hold.
Your financial plan and our process are critical in preventing these biases from impacting your financial lives. Your plan has the ability to distill all relevant information of what has happened into a succinct measure of confidence. We encourage you to use this as your guide to navigate the flood of information and remain focused on what you can influence.
Your financial plan is a valuable tool in times of market uncertainty. It has and will continue to be an unbiased signal of when decisions should be made regarding your financial future. If you can measure it, you can manage it.
Here at Aspire, we want to thank all those who are working to improve the lives of others during this trying time. We appreciate and will always value your service.