The SaVvy investment philosophy states that when investors buy stocks or bonds, their portfolios may gain in value as the stock market goes up. Investor’s portfolios are heavily exposed to “ice.” When investors move money into physical gold or buy downside insurance on the stock market via option contracts, their portfolios may gain in value when the stock market goes down. This particular portfolio has exposure to “fire.” Most investors are risk-averse, meaning they would rather have little returns in exchange for little to no losses. This means unsavvy investor’s portfolios would fall in the middle of the V, between fire and ice. Some unsavvy investors believe “fire” will never occur as the current economic conditions this time around are different. Unsavvy investors believe “fire” can be dampened by legislation with the hopes that a market crash may never occur. However, history has shown financial markets swing like a pendulum from fire and ice and back, putting unsavvy investors’ portfolios in a constant emotional tailwind. Volatility cannot be suppressed. Click Bubble Videos below to see how investor psychology has repeated itself since 1636.
