Local Crime

Have you heard of the Citizen App?

For those who haven’t, Citizen is basically like a social media platform to collectively highlight crime or emergency situations near you in real time. If you see something happening, you can post about it, upload photos and videos, etc. The app also scans emergency calls to report activity nearby.

The interface looks something like this:

I get these notifications on my phone constantly. Alerts range from Neighbor Performing Voodoo to burglary, assault, and more heinous crimes.

Having your phone ping you with bad news when you’d otherwise be blissfully unaware is an interesting dichotomy — On one hand, the notification causes some stress which could be avoided by just not downloading the app. On the other hand, I have a 2 year old son and a baby on the way next month and I’d like to know if there’s a concern nearby.

My end decision is to keep the app on my phone despite the added stress. Missing a potentially important piece of information is worth the discomfort.

This added awareness is important but it can distort how good or bad things actually are. By almost every measure, the world has never been a safer, more prosperous place to live, but we now have more access to observe every potential injustice or threat.

Conversely, sticking our head in the sand, going off the grid, and living our lives oblivious to the short term threats in the world is not only a decent strategy for keeping your sanity, it’s also a sound investment approach for building long term wealth.

In fact, most behavioral finance experts routinely produce studies to support the negative effects of short term news on investors and their portfolios.

I’m a big fan of behavioral finance. If you’re a client of mine, you know that I spend a lot of time highlighting how investments relate to you, your behavior, and your intentions, personally… It’s important.

There’s a saying that goes, people don’t have “investment problems”, investments have “people problems”… Which I think can be true as a testament to how people can have bad investing results even if an investment itself is pretty good.

These bad investing results are almost always a product of buying or selling at the wrong time due to outside influence in real time; influence like that of the Citizen app, or too much information (TMI) from any source…. More information often leads to more stress, more motivation to make decisions which can change the course of a longer term plan, and worse outcomes.

So, with all of the above noted, when launching the firm I inexplicably adopted a performance reporting system which sends WEEKLY EMAILS (!) showing the prior week’s portfolio gains or losses.

That’s right, every Sunday we send out an email that looks something like this:

(past performance not indicative of future results)

The “Total Weekly Change” figure at the top records the change in portfolio value as a result of investment fluctuations and deposits or withdrawals. This is what matters: is your net worth growing or declining?

When the weekly report is good, these emails are fun to receive.

But sometimes the weekly report is not good.

And sometimes it’s really not good.

Here’s a screenshot of a client’s report from March of 2020 (i.e. one of the worst times for markets in a decade).

(also, past performance is not indicative of future results in this case too…. thankfully)

That’s clearly a huge drop for one week.

Now we are all well-aware of how the markets have recovered since last years’ precipitous drop, but that recovery is reliant on sticking with an investment strategy even if you saw huge losses. In times like this, a weekly report may cause more damage and evoke a more emotional response than just tuning out.

To be clear, one single week is not going to be the factor which decides whether or not you’ll be able to retire, whether you’ll keep pace with inflation, or whether you’ll be able to send your kids to college. What matters is stringing together weeks and months and years en route to those things.

So why do I report weekly performance if it doesn’t matter?

As investors, we make choices and those choices have tradeoffs.

Portfolio losses and market volatility are normal parts of investing, and as an advisor, I know that you know your portfolio is getting hammered when the news is bad, and you’re going to see it on your monthly account statements when they come. In some cases, you might not see those statements for a few weeks — that’s a lot of time to be left with your thoughts and worries before addressing them.

Even though the weekly emails may shed light on a near-term situation which shouldn’t affect your long term plans, I would much rather adopt a transparent, proactive approach to face reality — and your concerns with that reality — head on rather than wait for an annual review, monthly statement, etc.

Here’s how things often go:

1. Clients receive weekly emails.
2. If there are no big drops I hear very little from clients about performance (people are also fairly non-communicative when their portfolios are growing too).
3. When a drop occurs, clients can respond to their weekly email to ask why or request a meeting.
4. We have a discussion and use it as an educational opportunity. We review what’s happening and why, and then use it reinforce our strategy.
5. The process repeats.

Every investor is different, but after enough time has passed, the above cycle of transparency + education typically leads to less reaction by investors even when the news is really bad.

So despite this approach being contrary to almost every behavioral finance expert’s suggestion (most suggest not checking your portfolio often), I believe these emails ultimately lead to more empowered, educated, and resilient investors.

This is why I have these unique systems in place. Sometimes you just have to abandon popular theory in pursuit of a different set of tradeoffs.

That’s all for now.

Onward,

Adam Harding | CFP | Advisor | Owner @ Harding Wealth Inc. | Smartvestor
Mobile Number: 480-205-1743

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