Financial Independence in Retiring with Wealth Management
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Financial Independence

We cannot remove emotions from our wealth.  Behavioral finance is an ever increasing and important topic in the wealth management world.  Even the term financial independence means many different things to many different people.  One of the first steps to financial independence, however you define that, is to recognize that we are limited by our emotional wealth baggage.  

Learning more about our baggage will allow us to free ourselves of it and then make prudent and sound long-term financial decisions.  At V&E Wealth Management we focus on the emotional side just as much as the mathematical formulas of plans, returns, etc. in order to assist you in making those sound long-term decisions.

Following are just a few more common behavioral finance issues that prevent people from achieving their wealth potential.


  • Overconfident bias.  In short, people think they are smarter and have better information than they really do.  This prevents investors from recognizing the true downside of a decision.
  • Anchoring bias.  I find this to be one of the more common and dangerous biases.  Anchoring is identifying a default number that is used, many times incorrectly, as some benchmark for future decisions.  For example, high points in a stock portfolio can be a dangerous anchoring bias.  Many investors will pinpoint their high market value before a crash.  Years later, that number is still used to make decision.  This high point really should be irrelevant to the decisions going forward but too often it is the main number used in making decisions.  This may lead to a big disconnect between risk taken and risk needed.
  • Cognitive Dissonance Bias.  When our pre-conceived notion or ideas are challenged with new information it can cause mental discomfort.  This may cause close minded decision making which is rarely a good position to be in.
  • Self-Attribution Bias. We see this in many facets of life.  As a poker player myself, this is very common in this sport as well as investing.  When we win a hand it’s because we played it great.  If we lose a hand it’s because we were unlucky or the other player is horrible and shouldn’t have played the hand.  The same bias happens in investing.  Many give themselves too much credit for their successful investments while blaming the markets or other factors when they don’t make money.  This keeps investors from objectively looking at past results which leads to history repeating itself.

There are many more biases including, but not limited to, conservatism, self-control, ambiguity aversion, optimism, endowment, mental accounting, confirmation, etc.  At V&E Wealth management we embrace the emotional aspect of your wealth.  By addressing it we help you make better financial decision. 

It is very difficult, if not impossible, to reach financial independence without understanding the roadblocks that lie ahead.  Allow us the opportunity to not only help you identify the roadblocks, included the emotional biases, but also break through them and reach your true financial independence. Investing involves risk including loss of principal.  No strategy assures success or protects against loss.

The Virtus View is a weekly to bi-weekly e-mail publication that Brian authors in order to keep you updated on the current market situation.
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