Is the Wealth Effect Making You Think You’re Rich? Story

Is the Wealth Effect Making You Think You’re Rich?

“How are you feeling?” As a physician, that phrase, or something close to it, may have been one of the first questions you ask of a patient.

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It works in finance, too. Much of the economy is driven by consumers’ confidence in their current situation and their outlook for the future.

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And you can certainly have a rosier assessment of your financial position than the numbers would actually bear out. But is there actual wealth behind that feeling of “being rich?”

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A famous football coach once said, “You’re never as good as you think you are when you win, and you’re never as bad as you feel when you lose.” Investors should modify that quote just a little bit to help them maintain perspective and stay the course with their investing plan.

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Is the Wealth Effect Making You Think You’re Rich?

It is the natural tendency of an investor to assume that their account balances are what they really own.

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Aside from the fact that the government owns some as-yet-unclear portion of your tax-deferred accounts, this is a very misleading attitude that leads to poor financial decisions. The “wealth effect” is well-known.

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Bull Markets and the Wealth Effect

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Should You Cut Your Losses and Sell Out at Market Lows?

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Should You Try to Time the Market?

[{"selector":"#anim-75e76ad6-92a3-40ca-93ae-17dd379b2f9c","keyframes":{"transform":["translate3d(107.71349%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-08ae1dd6-6669-41c7-8108-00b1a0f0cf6a","keyframes":{"opacity":[0,1]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"both"}] [{"selector":"#anim-5ed745d6-1325-4468-9dd4-00d96f98b2d7","keyframes":{"transform":["scale(0.15)","scale(1)"]},"delay":0,"duration":4000,"easing":"cubic-bezier(0.4, 0.4, 0.0, 1)","fill":"forwards"}] I’m not advocating that you somehow try to time the market. Remember, a bear market is a semi-regular occurrence. You will lose some money in bonds. You will lose some money in stocks. You will lose some money in real estate. Read More

Should You Try to Time the Market?

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Is the Wealth Effect Making You Think You’re Rich?

“How are you feeling?” As a physician, that phrase, or something close to it, may have been one of the first questions you ask of a patient.

It works in finance, too. Much of the economy is driven by consumers’ confidence in their current situation and their outlook for the future.

And you can certainly have a rosier assessment of your financial position than the numbers would actually bear out. But is there actual wealth behind that feeling of “being rich?”

A famous football coach once said, “You’re never as good as you think you are when you win, and you’re never as bad as you feel when you lose.” Investors should modify that quote just a little bit to help them maintain perspective and stay the course with their investing plan.

Is the Wealth Effect Making You Think You’re Rich?

It is the natural tendency of an investor to assume that their account balances are what they really own.

You’re Not as Rich (or Poor) as You Think You Are, and That’s OK

Aside from the fact that the government owns some as-yet-unclear portion of your tax-deferred accounts, this is a very misleading attitude that leads to poor financial decisions. The “wealth effect” is well-known.

Bull Markets and the Wealth Effect

Should You Cut Your Losses and Sell Out at Market Lows?

Should You Try to Time the Market?

Should You Try to Time the Market?

SWIPE UP NOW TO READ MORE

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