Retirement savers can fall into a “wealth effect” trap, meaning they take their cues from headline numbers like the performance of the Dow Jones industrial average rather than the returns on their own portfolio. The risk is that investors could be too cavalier when stocks are soaring, then be unprepared when they subsequently drop.
The flip side of that tendency is alive and well, too. Often, advisers say, they function as a sort of de facto therapist, urging clients to look at the big picture and not to panic.
“People get scared and say, ‘This is different’; people say, ‘This is so bad for the stock market, I feel like I have to get out,’” said Mitchell Goldberg, president of ClientFirst Strategy in Melville, N.Y. “You have to remind somebody you’re in this for the long term, you’ve already made an asset allocation,”