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Portfolio Choices & Penalty Kicks
Thomas Anderson, Head of Technical Analysis and Currencies, L C Group
By: The L C Group
The L C Group, as a wealth management institutions, faces numerous challenges when dealing with clients, especially during volatile market cycles. One of the most intimidating can be the perceived pressure to do something with our clienteles portfolios when they get itchy feet, even though our centuries of combined experience, analysis and research tells us to stick to a rigid long-term strategy.
This tendency to act was extremely prominent during January, even though again historically, the value of sticking to a well-conceived and regimented investment strategy is well documented.
A recent study of football players gives us a fascinating insight into this kind of pressure. The study focused on goalies during a full season, the data showed that out of 286 penalty kicks across the season, the goalie dove for the ball 94% of the time.
The interesting thing is that they would more likely be able to catch the ball by not diving. The following statistics back this up.
· - They caught 25% when they dove to the right
· - They caught 30% when they dove to the left
· - However they caught 60% when they stayed in the centre, which is twice as much!
Why did they Dive?
The answer is very straight forward, staying in the centre looks and feels very indecisive. The goalie is less prone to receive criticism for missing the ball if they dove, even if they missed more often. If they missed whilst diving, it is deemed as a good try. However if they miss while remaining put in the centre, well they look like a complete idiot.
L C Groups point is not to avoid action, that would simply be lazy and ineffective, rather guard against the compulsion to act, knee jerk reactions such as making sweeping portfolio changes just to appear to be decisive and well-intentioned. We always consider the rule that physicians follow obey; first do no harm. This is implanted from the get-go with all portfolios being structured around the client's best interest at the core of anything we do.
If you have any further question regarding this article of would simply like to establish how the L C Group can assist you, your family and/or your business secure your financial future then simply get in touch and arrange an appointment to speak to one of our wealth advisors.
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