8 Investment Behaviours That Can Derail Your Retirement Income

Retirement Income Planning, Calgary

Everyone wants to make money from their investments and it's easier to do if you can follow a plan. Understanding your behaviour is key to successful investing. Most of what we do each day is based on habits and mental shortcuts our brains have developed.


Here are a few that relate to investing, especially during your retirement years.


Linear thinking. We think in terms of straight lines. If something is going in one direction we think it will continue to go in that direction. If house prices are going up, they will continue to go up. If the stock market is going down it will continue to go down. The truth, however, is that just about everything goes in cycles. The economy goes in the cycle of recession, growth, peak, trough, recession. House prices go in cycles. The animal kingdom operates on the same principle.


Chasing performance. Imagine you have 3 investments and one earns 14%, one earns zero and the 3rd has a -9% return. Instinctively, you would want to sell the loser and buy more of the winner. We do this because we think that the winner will continue to go up in value.


Mental framing. Let's say you are in the market for some new running shoes and you find a pair for $50, but you then notice an advertisement of the same shoes at a store across the city for only $25. That's a 50% savings. So, would you drive across town to save $25? Most people would. However, let's say that you are in the market for a couch set that costs $3000. Would you drive across town to save $25? It's the same amount of money, but in our minds, we frame things differently. We do the same thing with our investments. Our decisions are based on the research that we listen to, which is usually the media. If the markets are down, the media commentary is negative and it will always be negative. They will go out of their way to find the most pessimistic advisor to support their perspective. The opposite happens after a few good days on the markets.


Overconfidence. Because we think in straight lines, we can become overconfident when things are going up and begin to think that our good fortune is the result of our good investment skills. At that point, we tend to only listen to and seek out information that confirms our bias. This is also called, confirmation bias - we only listen to information that confirms what we already believe. Alternatively, when the markets correct, as they always do, we feel ripped off and uncertain in our abilities after all.


Fear of loss. We feel the pain of loss far greater than we do the gratification of gain. Realizing that you have lost the $50 bill in your wallet is far worse than the joy of finding a $50 bill on the street. How does this affect our investment decisions? Well, our appetite for risk is far greater when the markets are going up. When the markets are heading south, we quickly become risk-averse. This leads to the reality of what most people do - buy high and sell low. The reality is that we should be more inclined towards risk when the markets are down, not up. Warren Buffet puts it this way: "Be fearful when others are greedy and greedy when others are fearful."


Confirmation bias. This is where we seek out and only listen to information that confirms what we already believe. If we believe that the economy is bad, we read, listen to, and pay attention to anything that confirms that perspective. Most of our decisions in life are based on our beliefs, not knowledge.


Herd Bias. Sometimes called the fear of missing out. What it is: The tendency for people to follow the crowd rather than basing investment decisions on their own analysis. An investor with herd bias will invariably be attracted to the most recent hot stock (or sector or fund) or property. Overweights the opinion of the majority and nuts or sells solely because everyone else is.


Anchoring. When an investment attains a certain high value we anchor to that number and believe that its worth is now attributed to that number and we believe to sell it for anything less is to sell at a loss. Most homeowners are guilty of this bias and struggle with selling their home when market conditions change.


When you have to make investment decisions on buying, holding, or selling your investments it is a good idea to discuss your options with someone who can take a more objective perspective. Often speaking with a professional can help you analyze your choices and help you make a confident decision.


Drawing an income from your life's savings requires a different approach than what you used to grow those savings.


As you move into retirement you need to create a different income strategy with a focus to simplify and consolidate your portfolio so that you have fewer decisions to make on a regular basis.


How can we help?

We are a husband and wife team and we work exclusively with financially successful individuals over age 55 who want to get their total financial house in order, get you on the same page, and start living the life they have always dreamed about. We want to help you - to get on with it.

Click Here to learn more about our process for getting your total financial house in order, creating your financial roadmap for retirement, and living a life that inspires you.



Schedule An Appointment



Retirement Income, Investment, & Tax Planning Exclusively for Those 55+

Willis J Langford BA, MA, CFP

Nancy Langford CRS 

Life is Short. Retire. Be Happy!

Share This Post:

Related Posts

Latest Testimonial

I contacted Langford Financial to see if they could help me with specific questions on retirement & estate planning, efficient tax strategies, CPP and OAS benefits, and income drawdown strategies. I was very nervous at first about whether they would be a good fit for my needs, but my concerns were quickly put to rest and Willis and his team made me feel at ease right from the very first meeting.

They are very easy to work with, are very knowledgeable and resourceful, are able to break down complex matters into an easy-to-understand manner, and are always quick to respond to any questions. They reviewed my situation and were able to tailor a plan to fit my specific needs, to my complete satisfaction.

The plan included amongst other things, the best way to utilize efficient income tax strategies. helped me to understand the correct drawdown of assets which would result in larger savings, and provided guidance on insurance products and efficient estate planning.

As a result, I have a much clearer picture of my financial situation now and feel very confident and satisfied with the plan that they have proposed for me, going forward. What I appreciated the most about Willis and his team was that, in addition to their friendly, personable and professional approach, at no time was there ever any pressure to purchase any products.

I am very happy with the service I received from Willis and his team and would recommend Langford Financial to anyone looking for advice on their retirement planning needs. You will not be disappointed!

Naila Jinnah

Naila Jinnah
Fee-Only Planning Client

Contact Us

Questions? Comments? Call us today at 587-755-0159 or fill out the form below:

Have Questions? Call Us Today At

Call Us

Join Our Newsletter