Long-term investing means investors will experience full market cycles. So, shouldn’t your investment strategy be designed for full market cycles?
Average investor behavior, well-documented by Dalbar, Inc. and other researchers of the years, often conflicts with investor goals and aspirations.
Why? A major reason is that investors’ emotions and reactions to loss and gain cause them to make investment decisions cause them to trail the total return of the investment or index they initially sought to capture. Behavioral Finance is a growing field of study within finance services and investment management, and for good reason.
Randy Swan, Founder and Lead Portfolio Manager of the Defined Risk Strategy (DRS), designed and launched the strategy in 1997. As the saying goes, “Necessity is the mother of invention”, Randy had a desire to reduce his own losses as an individual investor. Yet there was nothing in the marketplace that satisfied the ‘necessity’ Randy sought to address. After years of working as a senior manager for KPMG’s Financial Services Group, primarily working with risk managers and insurance companies, Randy wanted to bring risk management to the realm of investment management in the form of the DRS.
Originally published March 2013. Updated June 2016.