"Why are you always so reactive?"
That's not the best way to respond to a spouse in an argument.
Try it and find out.
It's a way of saying you're being overly emotional.
Yuck.
It's also not a great thing for a financial advisor to say to a client.
I don't think I'll try that and find out.
It is the job of a financial advisor to keep their clients from reactivity, though.
Nick Murray, an advisor to financial advisors, wrote:
"In my experience, all successful long-term investors are continuously acting on a plan. All the failed investors I've ever encountered up close were continually reacting to current events—and always the wrong way."1
The thing is investors experience the perpetual temptation to be reactive, especially in a media environment like ours. Instead, investors should be proactive and anchor investing on financial goals, which are less malleable than the latest narrative on financial news.
If you are investing for your 2-year-old's college, your opinion on the current presidential administration’s handling of geopolitical or national events and how that relates to their portfolio design may not matter as much.
If you're building wealth for retirement in your 40s and don't plan to take distributions until your 60s or 70s, the latest research report on economic GDP or interest rate expectations may not be the leading driver for where you put your money.
Reactive investors look at what just happened after the fact. Proactive investors look ahead to the future.
Practice investing proactively for the headlines of your life, and resist the impulse to invest reactively to the headlines of your social media feed.
Does this mean that all reactivity is wrong?
Of course not. Crisis can be an opportunity. Avoiding a personal financial crisis by having adequate liquidity and a portfolio you can handle is a must. The key is to create an investment plan that allows for calculated risk-taking and risk management, preventing impulsive reactions driven by greed or fear.
Rarely would you experience your spouse or financial advisor saying this to you as an insult:
"Why are you always so proactive?"
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Sources:
Nick Murray’s Scripts, p. 104.