Oftentimes, many investors get caught up in short-term results rather than looking at the big picture. This is known to behavioral economists as “narrow framing,” or “a tendency to see investments without considering the context of the overall portfolio.” Unfortunately, this idea can lead to many missed opportunities for investors.
Narrow framing can cause investors to either take too little risk or too much risk. People often get scared by daily market swings and keep their money in a bank account. On the other hand, people may invest in something considered risky without taking their collective portfolio into account.
According to this Wall Street Journal article discussing narrow framing, you can avoid these mistakes by checking your portfolio less often. Another suggestion is to aggregate your financial accounts by consolidating at one location, or by using software to display all your accounts in one place. This allows you to view your portfolio holistically, which can help to assess your overall risk exposure.
At Rockbridge, we help our clients invest for the long-term big picture. We come up with a portfolio in line with your risk tolerance and goals, and help you maintain a steady strategy throughout the ups and downs of the market. We can even help report on all of your accounts – even the ones we do not manage directly. It is our goal to help you avoid the trap of “narrow framing,” and become a disciplined investor. We will be here with you through it all!