You need to go read my friend Dan Egan’s piece Change the portfolio, or change the investor right now. Dan is the director of behavioral finance at Betterment and sought to answer a question from Corey Hoffstein about whether or not a portfolio should be built with the investor’s behavioral triggers in mind.
I answer this question yes, every day. I know too much and have dealt with too many investors in too many markets to answer otherwise. In fact, we’ve built out our asset management strategies specifically with this in mind. This is going beyond “optimization” based on some backtest – because as we all should know, an “optimized” portfolio that an investor cannot hang on to at the most crucial moment is anything but optimal in real life.
But Dan makes an important point that an investment organization needs to spend time and effort turning their investors into better versions of themselves too.
So maybe the answer is a little bit of both.
Regardless, here’s Dan’s take, it’s really good. Maybe the best thing I’ve seen him do on the blogs.