While emotional responses to investment gains and losses are natural, long-term investment success depends on a disciplined approach to help you overcome these potential pitfalls.
Blue squares of all sizes appear then slowly fade out to show the Charles Schwab logo. Then "Intelligent Portfolios" appears in a grayish-blue square to the right of the Charles Schwab logo.
Both logos then move to the bottom right hand of the screen and decrease in size. "Schwab Intelligent Portfolios® Combating emotion and bias" appears in the center with an animated thin white line completing a square.
Music stops. The title screen fades away to reveal speaker David Koenig in front of a fuzzy white and blue background. Onscreen text: David Koenig, CFA®, FRM®, Chief Investment Strategist, Schwab Intelligent Portfolio on a blue banner.
Hello, I'm David Koenig, Chief Investment Strategist for Schwab Intelligent Portfolios. Have you ever felt the elation at seeing a stock you purchased double or even triple in price?
While David Koenig is speaking, a chart trending upwards appears on a bluish-grey background with the line moving up into icons of animated clouds and the sun.
Or, felt anxiety over seeing your portfolio's value cut in half during a market tumble?
The chart changes to trend downward.
While emotional responses to investment gains and losses are natural, long-term investment success depends on a disciplined approach to help you overcome these potential pitfalls.
The same chart stops trending downwards and begins to trend upwards again, followed by another trend downwards. The chart then fades out completely and is replaced by a thin white square with the text "Schwab Intelligent Portfolios®"
Schwab Intelligent Portfolios is designed to keep emotion and bias at bay as you work toward your financial goals.
The screen pans to a dark blue background with the text "Investing scenario: Emotional roller coaster" in a thin white square. The screen then pans back to David Koenig.
Let's look at a scenario of the various emotions a hypothetical investor might feel as a stock moves up and down in price over time.
Say this client, Brian, meets his friend Joyce for dinner one evening, and the conversation turns to investing. Joyce brings up a stock in her portfolio that she's excited about and has already seen go up in price. Brian is familiar with the company and its products and agrees that it might be an attractive investment opportunity.
The screen transitions from David Koenig to a blueish-gray background with a chart priced from $0 to $60. We see an illustrated character Brian standing next to the chart. Brian smiles as the chart trends upwards and a magnifying glass with a $ symbol appears on the top right.
The stock is $20 a share but quickly jumps to $40 while Brian is doing his own research. Brian doesn't want to miss out on additional potential gains, so he logs in to his account and buys the stock.
The magnifying glass is soon replaced with a receipt and coin symbol as David Koenig continues narration.
The stock then climbs to $56 a share over the next few months.
The receipt and coin symbol are replaced with a building looking like a bank.
Brian wants to increase his potential for gains, so borrows money to buy more shares.
The stock then starts to slowly decline.
The chart begins to decline, Brian waves their hand.
Brian chalks it up to overall market weakness and is confident it will come back.
A few weeks later, the company announces earnings well below expectations, and the stock slides significantly below the price Brian paid for it. The investment is now underwater, and he's in panic mode as emotions take over.
While David Koenig is narrating, a white "alert" symbol appears in the top right with the chart declining significantly. Brian shrugs their shoulders.
The stock eventually starts to move up again but doesn't seem to be rising as quickly as it did when Brian first bought it.
The chart begins to rise slowly.
He worries the stock might go back down even more, so he decides to cut his losses and sell his shares.
Brian shows a mix of emotions.
Over the next few months, the stock rises back to the price Brian first paid for it. Brian is kicking himself for not having held on for just a bit longer. Brian is experiencing the common behavioral bias of regret.
The stock continues to rise, and now Brian doesn't know what to do.
The screen pans back to the narrator David Koenig.
He's locked in short-term losses that he'd like to recover, but he's worried about potential additional losses. At this point, Brian is confused and disheartened over the whole experience.
The screen pans from David Koenig to the text "recognizing and overcoming biases" on a dark background in a thin white square then pans back to David Koenig.
Most investors will experience these emotions at some point. However, awareness of them can help you recognize them when they occur. Rather than chasing the latest hot stock and potentially succumbing to market timing.
A blue block slides in from the right-hand side with the text "Time-tested investment principles" with the strategies David mentions being added to the pop-up box as he continues to narrate:
● Invest in a diversified portfolio.
● Determine your time horizon and risk tolerance.
● Rebalance as markets fluctuate.
● Ignore short-term marketing noise.
● Keep costs low.
Following a few time-tested investment principles can help keep you on track as you work toward your financial goals—such as investing in a diversified portfolio based on your goals, determining time horizon and risk tolerance, rebalancing as markets fluctuate, ignoring short-term market noise, and keeping costs low.
Screen cuts from David to a dark background with the text "Automated investment principles" in a thin white square then pans back to David.
Fortunately, it's never been easier to implement these investment principles. Digital advice solutions, such as Schwab Intelligent Portfolios, are designed to combine the power of people and technology to automate these principles for you to help add discipline and take emotion out of the investment process so you can stay focused on your longer-term goals.
The screen pans from David Koenig to blue squares of all sizes appearing, then slowly fading out to show the Charles Schwab logo with the text "Intelligent Portfolios" appearing in a greyish-blue square to the right of the Charles Schwab logo. Disclosures then appear on the screen.
Please read the Schwab Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing, and disclosures related to the Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® programs. Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium are made available through Charles Schwab & Co. Inc. ("Schwab"), a dually registered investment advisor and broker dealer.
Portfolio management services are provided by Charles Schwab Investment Advisory, Inc. ("CSIA"). Schwab and CSIA are subsidiaries of The Charles Schwab Corporation.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
Past performance is no guarantee of future results, and the opinions presented cannot be viewed as an indicator of future performance.
Investing involves risk, including loss of principal.
Diversification, asset allocation, and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets. Rebalancing may cause investors to incur transaction costs, and when a nonretirement account is rebalanced, taxable events may be created that may affect your tax liability.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
