Are you a predictably irrational investor?

Nothing defines humans better than their willingness to do irrational things in the pursuit of phenomenally unlikely payoffs. This is the principle behind lotteries and dating…”

– Scott Adams, creator of the comic strip Dilbert

UPDATED May 2016: With full confidence, I can say that you are irrational when it comes to investing.

I know this not from talking to your broker or your mother-in-law, and I haven’t hacked into your portfolio statements. I know this because you’re human.

What will happen in the stock market isn’t predictable. But one thing is absolutely for sure and for certain: Investors are predictably irrational. We’re not talking smart or stupid, sophisticated or naïve. We’re talking across-the-board irrational.

So maybe you’re thinking that you’re the exception. You think you can handle the volatility of the market by just gritting your teeth and praying everything turns out all right as you roll the dice in the Wall Street Casino. Or maybe you think that at the first sign of trouble, you’ll be able to bail out of stocks and into bonds or money market funds to lock in your gains.

Researchers say, “Nope, that’s not what’s happening…”

[Read more…] “Are you a predictably irrational investor?”

Retirement confidence hits record low

Here’s what to do…

Americans’confidence in being able to retire comfortably is at a record low, despite the economy showing signs of improvement and the stock market hitting record highs.

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To compensate for their lack of retirement funds, more people are planning to postpone retirement.

That’s according to the just-released annual study by the Employee Benefit Research Institute.

The statistics are bleak:

  • 57% of those surveyed report having less than $25,000 in total household savings and investments. Only 24% reported savings of $100,000 or more
  • Only 24% are very confident they’ll be able to live comfortably in retirement
  • Only half said they could definitely come up with $2,000 to cover unexpected expenses within the next month

How long do you think $25,000… or even $100,000 in savings will last a person in retirement? On average, a man turning 65 this year will live another 20 years, and a woman that age will live another 23 years.

To compensate for their lack of retirement funds, more people are planning to postpone retirement. That strategy may not work very well, since more than 47% of current retirees were forced into retirement sooner than planned.
[Read more…] “Retirement confidence hits record low”