Instinctive human behavior can cause us to make bad decisions – selling investments in a panic when the market is low (even though we know we may lose money), believing we’re better than the next guy and trying to beat the market (even though we know it’s nigh impossible), and sometimes doing nothing: paralyzed by uncertainty (even though we know we should act now).
It’s not just individuals who act this way. According to Richard Thaler (professor of economics and behavioral science at the Booth School of Business at the University of Chicago) too much caution hinders a turn around:
• Congress is delaying necessary infrastructural improvements in the US due to the uncertainty of foreign economies – even though the need for roads and bridges will only grow. In fact, now is the time to address this problem, while construction and borrowing costs are low.
• Corporations are hoarding large amounts of cash, frozen with doubt: Google is holding more than $39 billion in cash. Thaler questions a company that can’t find an investment to earn above the tiny return on its cash.
Thaler claims actions like these may be impeding our ability to turn the market around.
It’s tough to keep a cool head with the sizzling news headlines out there, which is why we recommend coming up with a plan and sticking to it. Set a goal in your Betterment account and focus on the long-term outcome.
Better yet, set up auto-deposit (based on Betterment’s advice) and you’ll be less likely to have a knee-jerk reaction to a sensational headline. Being pro-active (and calm) with your investments will help you achieve your goals faster.
Optimizing Performance in Lower Risk Betterment Portfolios
In this methodology, we provide insight into how we optimize the performance of the lower risk bonds in Betterment's portfolios.
Everything You Need to Know About Emergency Funds
Some things you need to know about emergency funds: what they are, how big they should be, when to use them, and more.
Is Betterment Worth It? Estimating the Added Value of a Robo-Advisor
Based on our estimation, using Betterment’s retirement recommendations could earn you 38.8% more after-tax money in retirement compared to investing on your own.
Explore your first goal
This is a great place to start—an emergency fund for life's unplanned hiccups. A safety net is a conservative portfolio.
Whether it's a long way off or just around the corner, we'll help you save for the retirement you deserve.
If you want to invest and build wealth over time, then this is the goal for you. This is an excellent goal type for unknown future needs or money you plan to pass to future generations.