FP Answers: How do I recognize investment bias in myself and my adviser?

The world has come to be dominated by motivated reasoning, where people believe what they want to believe simply because it feels good and allows them to fit in with their friends and colleagues. Sometimes, trying to be rational involves being unpopular and coping with peer pressure.Article content

Without knowing you personally, my experience is that the biggest bugaboo for investors is often overconfidence. I’m not suggesting you should be pessimistic or cynical, but many people would be better off if they lowered their return expectations by some amount to be more realistic. The FP Canada Guidelines for financial planning suggest a 60/40 asset-to-income portfolio might generate a long-term return of between four and five per cent before product costs and advisory fees. Most people I meet are counting on more than that even though they insist they are being “reasonable” in their expectations.

John DeGoey is a senior investment adviser and portfolio manager at Wellington-Altus Private Wealth , a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

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