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Behaviour not Mathematics is the key to Wealth Creation

“Attitude is a little thing that makes a big difference”
– Winston Churchill

Our behaviour and attitude are big game changers in the challenge that is life. If these factors affect our daily activity and outcomes, imagine how they affect big decisions, like investment. Our behaviour affects our financial position. Our psychology determines how fast we achieve our goals. Excellence is not a skill, it is an attitude determined by how we undertake hardships and achievements alike. The only disability in life is a bad attitude. The same is true for investment. Learning from past experiences in investment is crucial for a good investor.

Predicting and timing the market leads to fear and anxiety. If not eliminated, this reflects in our investment decisions and in the future, our investment returns as well. A good financial adviser helps you achieve the best attitude required for investments, thinking about your needs as well as your goals. “It’s not that we’re dumb. We’re wired to avoid pain and pursue pleasure and security. It feels right to sell when everyone around us is scared and buy when everyone feels great. It may feel right-but it’s not rational.” – Carl Richards. Carl Richards is a a Certified Financial Planner™ and director of investor education for a community of independent wealth management firms throughout the United States.

Your Investing Behavior Decides Everything

You are responsible for your behaviour, and we understand how it affects your assets. “Our conversations about money often leave us feeling confused, misunderstood, and even angry”, quoted from Carl Richard’s book, The Behavior Gap. Investment success is not about skill, it is about behaviour. If a person has control on their emotional and psychological involvement in investment, they will, in utmost probability, outperform their peers. The sign of a bad investor is that he tends to buy high but sell low. Carl Richards noted that this behaviour, in turn, creates a gap between investment returns and investor returns.

Healthy Minds Lead to the Right Decisions

After years of working with clients, we, at Pragmatic Solutions, have noticed the behaviour gap closely. Financial Awareness is key in comprehending the attitude of investors. The behaviour gap can be avoided if we make smart, simple decisions about money. Another major factor is diversification. Let logic decide your investments, not your fears, assumptions or feelings. Behavior is the number one factor in deciding investment returns. The best example of this would be the 2008 stock market crash, from which people suffered gigantic losses and therefore, have a lot of emotional baggage and devastating recollections. This, no doubt, has a huge role in making them reluctant and unprepared to invest again. Isolating emotions from money is difficult. Separating them from each other is the right path, which is tough without guidance.

Our strategies for our clients keep in mind the importance of their emotional stability and also, the volatility of the market. An understanding of client behaviour ties our instincts tightly to the needs and wants of our clients, nevertheless taking risks but only those that our client can afford to take. The portfolios we make are strategically based on these factors, that can undergo the dips in the unpredictable ocean of the market. We emphasise on forming long term, steady relationships with our clients, blending into their lives like family. With constant guidance, extensive experience, we aim to diminish the behaviour gap.

The Only Investment Pattern that Matters is Behavioural

The panic of 2008 caused many people enormous losses. While people chickened out to their fears and started selling low, many people made money during this drop in the market. One must know where and how the money is moving. A financially aware person who strictly follows a set of strategic principles, with the guidance of a trusted financial adviser, can achieve this. Take under consideration the Pareto Principle, also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity, states that, for many events, roughly 80% of the effects come from 20% of the causes. In 1906, in a strongly socialist British Empire, Italian economist Vilfredo Pareto noticed that 80% of the wealth was controlled by 20% of the population. Most of the wealth is controlled by a very small proportion of the population.

Right decisions and the right risks will lead to a growing bank balance. Behavior, positive or negative, influences the outcomes of your investment. We may reap what we sow. With the right attitude and wisdom, we may reap much more than we sow. Our financial advisers closely observe the market and have excellent experience in dealing with it. We can help you reap more than you sow, regardless of floods or drought. A professional relationship which blooms on trust will transform your outlook on the stock market. At Pragmatic Solutions, we build our foundation on such relationships. With advisers like ours, there are only strategic investments, positive investors, and a negligible behaviour gap.

“Make Better Financial Decisions by Understanding the Behavior Gap.”

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