Unsubscribe

Confirm you would like to unsubscribe from this list

Remove strategy

Confirm you would like to remove this strategy from your list

Welcome to Thornburg

Please select your location and role to help personalize the site.
Please review our Terms & Conditions

For Institutional / Wholesale / Professional Clients

The content on this website is intended for institutional and professional investors in the United States only and is not suitable for individual investors or non-U.S. entities. Institutional and professional investors include pension funds, investment companies registered under the Investment Company Act of 1940, financial intermediaries, consultants, endowments and foundations, and investment advisors registered under the Investment Advisors Act of 1940.

TERMS AND CONDITIONS OF USE

Please read the information below. By accessing this web site of Thornburg Investment Management, Inc. ("Thornburg" or "we"), you acknowledge that you understand and accept the following terms and conditions of use.

Disclaimers

Products or services mentioned on this site are subject to legal and regulatory requirements in applicable jurisdictions and may not be licensed or available in all jurisdictions and there may be restrictions or limitations to whom this information may be made available. Unless otherwise indicated, no regulator or government authority has reviewed the information or the merits of the products and services referenced herein. Past performance is not a reliable indicator of future performance. Investments carry risks, including possible loss of principal.

Reference to a fund or security anywhere on this website is not a recommendation to buy, sell or hold that or any other security. The information is not a complete analysis of every material fact concerning any market, industry, or investment, nor is it intended to predict the performance of any investment or market.

All opinions and estimates included on this website constitute judgements of Thornburg as at the date of this website and are subject to change without notice.

All information and contents of this website are furnished "as is." Data has been obtained from sources considered reliable, but Thornburg makes no representation as to the completeness or accuracy of such information and has no obligation to provide updates or changes. Thornburg disclaims, to the fullest extent of the law, any implied or express warranty of any kind, including without limitation the implied warranties of merchantability, fitness for a particular purpose and non-infringement.

If you live in a state that does not allow disclaimers of implied warranties, our disclaimer may not apply to you.

Although Thornburg intends the information contained in this website to be accurate and reliable, errors sometimes occur. Thornburg does not warrant that the information to be free of errors, that the functions contained in the site will be uninterrupted, that defects will be corrected or that the site and servers are free from viruses or other harmful components. You agree that you are responsible for the means you use to access this website and understand that your hardware, software, the Internet, your Internet service provider, and other third parties involved in connecting you to our website may not perform as intended or desired. We also disclaim responsibility for damages third parties may cause to you through the use of this website, whether intentional or unintentional. For example, you understand that hackers could breach our security procedures, and that we will not be responsible for any related damages.

Thornburg Investment Management, Inc. is regulated by the U.S. Securities and Exchange under U.S. laws which may differ materially from laws in other jurisdictions.

Online Privacy and Cookie Policy

Please review our Online Privacy and Cookie Policy, which is hereby incorporated by reference as part of these terms and conditions.

Third Party Content

Certain website's content has been obtained from sources that Thornburg believes to be reliable as of the date presented but Thornburg cannot guarantee the accuracy, timeliness, completeness, or suitability for use of such content. The content does not take into account individual investor's circumstances, objectives or needs. The content is not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services, nor does it constitute investment advice and should not be used as the basis for any investment decision.

Suitability

No determination has been made regarding the suitability of any securities, financial instruments or strategies for any investor. The website's content is provided on the basis and subject to the explanations, caveats and warnings set out in this notice and elsewhere herein. The website's content does not purport to provide any legal, tax or accounting advice. Any discussion of risk management is intended to describe Thornburg's efforts to monitor and manage risk but does not imply low risk.

Limited License and Restrictions on Use

Except as otherwise stated in these terms of use or as expressly authorized by Thornburg in writing, you may not:

  • Modify, copy, distribute, transmit, post, display, perform, reproduce, publish, broadcast, license, create derivative works from, transfer, sell, or exploit any reports, data, information, content, software, RSS and podcast feeds, products, services, or other materials (collectively, "Materials") on, generated by or obtained from this website, whether through links or otherwise;
  • Redeliver any page, text, image or Materials on this website using "framing" or other technology;
  • Engage in any conduct that could damage, disable, or overburden (i) this website, (ii) any Materials or services provided through this website, or (iii) any systems, networks, servers, or accounts related to this website, including without limitation, using devices or software that provide repeated automated access to this website, other than those made generally available by Thornburg;
  • Probe, scan, or test the vulnerability of any Materials, services, systems, networks, servers, or accounts related to this website or attempt to gain unauthorized access to Materials, services, systems, networks, servers, or accounts connected or associated with this website through hacking, password or data mining, or any other means of circumventing any access-limiting, user authentication or security device of any Materials, services, systems, networks, servers, or accounts related to this website; or
  • Modify, copy, obscure, remove or display the Thornburg name, logo, trademarks, notices or images without Thornburg's express written permission. To obtain such permission, you may e-mail us at info@thornburg.com.

Severability, Governing Law

Failure by Thornburg to enforce any provision(s) of these terms and conditions shall not be construed as a waiver of any provision or right. This website is controlled and operated by Thornburg from its offices in Santa Fe, New Mexico. The laws of the State of New Mexico govern these terms and conditions. If you take legal action relating to these terms and conditions, you agree to file such action only in state or federal court in New Mexico and you consent and submit to the personal jurisdiction of those courts for the purposes of litigating any such action.

Termination

You acknowledge and agree that Thornburg may restrict, suspend or terminate these terms and conditions or your access to, and use, of the all or any part this website, including any links to third-party sites, at any time, with or without cause, including but not limited to any breach of these terms and conditions, in Thornburg's absolute discretion and without prior notice or liability.

Decline

Give Us a Call

Fund Operations
800.847.0200

FIND ANOTHER CONTACT
Practice Management

Keeping Your Clients Invested through Behavioral Finance

Jan Blakeley Holman, CFP, CIMA, ChFC, CDFA, CFS, GFS
Director of Advisor Education
13 Apr 2020
3 min read

Advisors, behavioral finance provides an easy framework to keep clients from making poor investment decisions.

Investment theories like Harry Markowitz’ Modern Portfolio Theory and Eugene Fama’s Efficient Market Hypothesis help us understand how the markets work, but they only go so far. Interestingly enough, Markowitz and Fama left investor behavior out of their theories.

In the real world, human biases can have a much greater effect on investor returns than mathematics. Biases are subconscious beliefs that affect human behavior. While biases differ from individual to individual, millions of people acting on the same biases at the same time have created some of the world’s great investment bubbles: the tulip bubble of the 17th century, the dot-com bubble of late 1990s, and in recent years, the meteoric rise of Bitcoin.

The study of human biases in the investment process is called Behavioral Finance. Unlike investment theories, behavioral finance takes human nature into consideration by acknowledging that:

  • Investors are “normal,” not “rational”
  • Markets are not efficient, and
  • Investors do not use modern portfolio theory to create investment portfolios

Why Advisors Should Care About Behavioral Finance

For more than 25 years, Dalbar has researched and compared investor performance to the performance of broad market indexes and has found that investors earn less year after year. In one study they looked at investment returns for the 30 years ending 2013. During that period, the total return of the S&P 500 was 11.1%. The average stock mutual fund investor earned 3.69%.

Of the difference, 1.4% is mutual fund expenses and the rest is a result of the investor’s emotions which precipitated poor investment decisions.

How Advisors Can Help Their Clients Today

While some investors believe they can “go it alone,” recent studies have determined that the opposite is true.

In 2013, Merrill Lynch released a study of the value of different services provided by financial advisors that found that behavioral coaching from the advisor added 100 to 400 basis points to the investor’s return.

In 2017, Paul Kaplan and Dave Blanchette of Morningstar found that investment strategies implemented by advisors could add “significant” value to investor returns.

Three Ways Advisors Can Manage Client Behavior

Use this framework to stop clients from making poor investment decisions.

  • Practice
    The role you play in keeping your clients from making unwise decisions cannot be overstated. You play a critical role in your clients’ financial well-being by coaching them and shaping their behavior. To do that, create a client experience that focuses your clients on life goals tied to long-term investing instead of focusing on short-term investment performance.
  • Purpose
    Goals-based investing causes clients to shift their focus from the performance of their entire investment portfolio to the performance of the portfolio allocated to each individual goal. It reminds clients why they’re investing and enables them to visualize investment risk and progress by time frame instead of total portfolio value.
  • Process
    It should come as no surprise that your biases also influence the recommendations you give your clients. In order to moderate the influence of your biases, adopt an objective, time-tested investment process and strategy that you use with each and every client. Within that process, rely upon a small number of holdings that you know well and build investment portfolios that provide your clients with competitive performance during rising markets and guardrails during declining markets.

Investors will always face challenging investment markets. Your job is to 1) recognize the part that client emotions play during volatile markets, 2) focus clients on the things that matter like their life goals, and 3) protect them from the human tendency to make poor investment decisions.

Discover more about:

Stay Connected

Subscribe now to stay up-to-date with Thornburg’s news and insights.
Subscribe

More Insights

Markets

The Ghosts of Markets Past

We all know that past performance is not an indicator of future results, but how the markets have reacted to events in the past provides valuable perspective.
Economy

What Digitization Means for the Semiconductor Industry

As digitization continues uninterrupted, semiconductor market cycles should become less volatile, still market whipsaws open opportunities for active managers.
Monetary & Fiscal Policy

Fed Tightens as Expected, but the Central Bank Is Not the Only Show

July's 75 bps tightening is important, but overshadowed by PCE and earnings reports.

Our insights. Your inbox.

Sign up to receive timely market commentary and perspectives from our financial experts delivered to your inbox weekly.
This field is for validation purposes and should be left unchanged.