hy do investors often think their investments perform worse than they actually do? This is not a rhetorical question. It does happen. I have had many conversations with investors who are discouraged about their investment performance. Then, when they review the return on investment details, they are relieved and impressed. I am not aware of any evidence that explains this, however, I will offer some suggestions on why this form of negativity might happen. We do know from academic research those who convey negative thoughts and opinions have more credibility than those who have optimistic opinions. For example: if someone wrote an article saying the U.S. would go into a deep recession if certain circumstances were to occur, I believe the author of that article would seem a credible source. The negative views would be given in- W Investors' human nature leans towards pessimism Peter Watson Guest Contributor 27 | Thursday, September 29, 2016 | OAKVILLE BEAVER | www.insideHALTON.com Dollars & Sense stant credibility such that another article saying the exact opposite may be discounted. The common sense explanation is humans generally prefer bad news. I believe, humans are programmed to receive bad news, so are more likely to accept negative investment or economic forecasts. Sometimes the preference for negative news is exploited on the basis that it sells. Could that explain why investors rst look for negativity of investment returns? Is that just how our brain is programmed? Is our automatic default to look for negativity? We also know from other academic research humans have an inversion to loss. When anticipating an investment loss or gain, the potential of a loss is twice as signi cant as the potential of a gain of the same amount. The human brain is twice as focused on losses as it is on gains. The natural tendency to emphasize loss could be the reasons why investors think pessimistically about their personal investing. Again, it is how the human brain is programmed that dictates how we think. A cautionary word to investors: monitor your investment strategy and performance with facts, not illusions. Let the numbers speak for themselves. If your estimated long-term investment objective is to earn an annual six per cent return on investment, then I recommend you evaluate your long-term performance based on how well your investments performed. Your long-term objectives will not be reached by overreacting or misinterpreting the reality. A question for the readers of this column: Do these human tendencies interfere with your logical thinking that is required to produce good long-term investment returns? One symptom of negativity bias I have seen over the years is when individuals have a signi cant amount of their assets not invested. A large amount of money sitting in the bank making virtually no interest. That often is a symptom of an investor who is focused on negativity and will accept no return on a signi cant part of their portfolio in order to avoid any investment risk. My suggestion is to continually monitor your nancial and investing progress with facts and try to control the illusions that are just a natural part of being human. -- Submitted by Peter Watson of Peter Watson Investments and Aligned Capital Partners Inc., MBA, CFP , R.F .P ., CIM, FCSI., Certi ed Financial Planner Two Hands Four Paws THeraPy Bowen helps with arthritis Lameness-digestive Issues Alanna Skorupski Registered Canine Massage Therapist Canine Bowen Practitioner JoInT sTIFFness and MucH More! 2376 Parkhaven Blvd, Oakville 2376 Parkhaven Blvd, Oakville · 905-257-5880 905-257-5880 maximekitchens.ca maximekitchens.ca fourpawstherapy@gmail.com (647) 225-2579 Milton, Ontario Leaky Basement? Call Us! ON NOW AT THE BRICK! Call Us... 905-510-9739 Professional, Cost Effective Solutions for Wet wayne@wisecracks.com Basements w w w. H a l t o n Wi s e C ra c k s . co m SAVING YOU MORE For more details go instore or online @thebrick.com. R0263759717