Self-control strategies

Discussion in 'Financial Planning' started by David S Meyers CFP, Dec 27, 2011.

  1. Saw the following, relating the results found in a report
    by Barclay's Wealth. (Text below copied from a blog
    posting about it - the report itself may be found here:
    http://www.barclayswealth.com/insights/assets/pdf/BW13_UK__ForWeb.pdf
    )

    What caught my attention was Strategy #1, which I'v seen other
    folks post about in other contexts as well. It just seems to
    me to be an *terrible* strategy. It's up there with the idea
    of buying load mutual funds as a way to trick yourself into not
    trading frequently because of the costs - it's just a bad idea.

    (There may be other reasons to buy illiquid investments - perhaps
    the best is if it's intended to be a very long-term holding and
    the illiquid nature leads to great low-price opportunities to buy
    from someone who is under pressure to sell)

    The others are mostly pretty good strategies. I especially like
    #3 and #5 - rules and cooling-off-periods. The example of a rule
    they provide may actually be controversial (ie. to a total-return
    portfolio management style), but the idea of rules - a system -
    is great.

    --david

    The report identified seven self-control strategies to help people
    counter their tendencies to make bad financial decisions:

    1. Limit the options. Purchase illiquid investments to avoid the
    urge to sell investments when the market is falling.

    2. Avoidance. Avoid information about how the market or portfolio
    is performing in order to stick to a long-term investment
    strategy.

    3. Rules. Establish and use rules to help make better financial
    decisions, such as spend only out of income and never out of
    capital.

    4. Deadlines. Set financial deadlines. For example, aim to save a
    certain amount of money by the end of the year.

    5. Cool off. Wait a few days after making a big financial decision
    before executing it.

    6. Delegation. Delegate financial decisions to others, such as
    allowing an investment adviser to manage your portfolio.

    7. Other people. Use other people to help reach financial goals.
    An example would be meeting with a financial adviser to make
    and execute a financial plan.

    --
    David S. Meyers, CFP(R)
    http://www.MeyersMoney.com
    disclaimer: for educational purposes only. This is not financial advice.
     
    David S Meyers CFP, Dec 27, 2011
    #1
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