Modify or Amplify?

Don Phillips was recently a guest on Morningstar’s new podcast, “The Long View.”

I love how he framed the primary attribute of good investment advice:

“Are they launching internet funds in 1999, or are they always trying to, you know, either amplify or modify the behavioral, the fear and greed cycle. We’re all in the behavior modification business and that’s the question you've got to ask; are you amplifying the fear and greed cycle trying to make money off of investors fear and greed or are you trying to modify it?

And sadly, if you say look at say fund advertising, you see over the decades that the fund industry is tried to amplify it. They ran ads for tech heavy funds after the peak or at the peak in 1999 and then after the market crash they were running ads for their government bond funds, encouraging to not take risk at the exact time when you should have been taking risk. Unfortunately that’s been a very consistent contrarian indicators, over the years.”

This is why I'll never forecast and rarely put stake into current headline events. They are amplifiers. They are fickle. They are overrated. The current trade tiff between the US and China is my favorite example. It's talked about Ad nauseum within the investment community every single day, and as a result, bleeds into conversations with every day American's with a retirement plan. I'm not saying these things can't have an impact. I'm saying we waste too much time worrying about them. 

The worthwhile investment advice never amplifies behavior.  It consists of nudges, modification, thoughtfulness, context, probabilistic longer-term thinking and communication grounded in humility. Not very exciting, yet critical to better investor experiences and outcomes.

We are the sum of who we choose to surround ourselves with. Investment advice should come from someone looking to modify, not amplify, your behavior as an investor.

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Source: "The Long View" Morningstar Podcast with Don Phillips