Emotional investing can be costly

Emotional investing can be costly 

Emotional investing is inferior to evidence-based investing. It’s a belief of ours that comes up in the very first conversation we have with a prospective client and one we repeat often. Recent times reinforce our belief.

In many ways, it has been a rough couple of years. There has been plenty to fret about. Along the way we have emphasized the importance of staying true to our approach of remaining diversified, patient and disciplined – to be investors not speculators.

The issue isn’t whether it is okay to get nervous or otherwise be emotional. Emotional reactions are a natural part of the human experience and make life interesting. The problem comes when we allow what we feel in the moment to trigger actions that can destroy a sound plan.

The problem comes when we allow what we feel in the moment to trigger actions that can destroy a sound plan.

Emotional investing is something many people battle. A recent survey of 1,116 U.S. consumers with investment accounts conducted by MagnifyMoney sheds light on how pervasive the emotional investing challenge can be: 37% of investors have lost sleep worrying about the stock market, 2 of 3 surveyed have made an impulsive or emotionally charged investing decision they later regretted, 30% have cried over investing, and 32% of those surveyed admitted to having traded while drunk.

emotional investing buy sell holdIn early 2020, the biggest emotional investing risk was allowing the fear of market decline to cause clients to abandon sound, long term holdings. Today, along with the usual fear of loss, we are seeing signs of the fear of missing out. With more people worth more than ever, interest in trying something new is increasing. Whether its chasing returns of what’s been hot lately, dabbling in direct owned real estate, buying new companies developing new technologies, trading actively or overweighting types of assets to hedge inflation, we see too many people shrinking their time frame and getting too tactical.

We employ many tactical maneuvers for clients but seek to execute these in the context of each client’s unique financial plan. By contrast, the tactical moves we just described have a long history of providing an inferior result to most who employ them. Placing large bets can be devastating if they do not pay off adequately or fail. But even small bets can be dangerous because if they succeed, the temptation to bet again with more money gets stronger.

It is easy to get sucked into these forms of emotional investing. It feels like it is using “house money” and is therefore lower risk. It is ironic that the less tactical, less speculative approach is what produces the higher wealth amounts which create the urge to be more tactical and speculative. Regardless of whether it’s based more on fear or greed, don’t succumb to emotional investing. Stay diversified, patient and disciplined. Invest, don’t speculate.

News & Notes

Social Security Scams continue to proliferate: In November, the Social Security Administration (SSA) put out yet another bulletin warning of scams. The SSA wants you to know that ALL OF THE BELOW ARE SCAMS!

Any communication that:

  • Threatens to freeze your Social Security payments or number, even if they have part or all of your Social Security number
  • Warns of arrest or legal action
  • Demands or requests direct deposit or banking information
  • Requires payment by gift card, prepaid debit card, internet currency, or by mailing cash
  • Pressures you for personal information
  • Requests secrecy
  • Threatens to seize your bank account
  • Promises to increase your Social Security benefit
  • Tries to gain your trust by providing fake “documentation,” false “evidence,” or the name of a real government official

If you receive any form of the above communications, try to stay calm. Government employees will not threaten you, demand immediate payment, or try to gain your trust by sending you pictures or documents. The best thing to do if you receive a suspicious call, text, or email is hang up or do not respond. Do not provide anyone with money or personal information when you feel pressured, threatened, or scared. Then, report it to the SSA Office of the Inspector General (OIG). Do not be embarrassed if you shared personal information or suffered a financial loss.

Casandra Garrett, CFP with Moisand Fitzgerald TamayoRyan Osborne, Financial Analyst with Moisand Fitzgerald TamayoPaula Rocha, Financial Planner with Moisand Fitzgerald Tamayo

Congratulations Casandra, Ryan, & Paula: In the fall of 2021, Casandra Garrett, CFP ®, Ryan Osborne, CFP ® and Paula Rocha all became Enrolled Agents (EA). EAs are licensed by the Internal Revenue Service to represent taxpayers before the agency. Two of our core values are a Passion for Excellence and Lifelong Learning. As such, we invest in our professional development. We congratulate Cassandra, Ryan, and Paula on earning this license. Our tax team now consists of seven people who can handle IRS matters for our clients. 

Upcoming Important Dates

February 15 – Form W-4 filing deadline for taxpayers who claimed an exemption from income tax withholding for the prior year to continue their exemption in the current year

March 15

  • Income tax return (Form 1120S) filing and payment deadline for calendar year S-corporations
  • Income tax return (Form 1065 or 1065-B) filing and payment deadline for calendar year multi-member partnerships and multi-member LLCs (default)
  • K-1 issuance deadline
  • Request for automatic six-month extension (Form 7004) filing deadline to extend filing Form 1120S, 1065, and 1065-B
  • S-corporation election (Form 2553) filing deadline to be treated as an S-corporation in the current year

March 31 – End of Medicare General Enrollment Period

April 1 – “Required Beginning Date” which is the deadline to complete the first Required Minimum Distribution (RMD) from an IRA or retirement account for anyone who turned 72 in 2021. (2022 RMD due date is December 31, 2022)

April 18 –

  • Income tax return (Form 1040) filing and payment deadline
  • Gift tax return (Form 709) filing and payment deadline
  • Request for automatic six-month extension (Form 4868) filing deadline to extend filing Form 1040 and 709
  • Q1 estimated payment deadline
  • Deadline to contribute to an IRA or HSA for prior tax year
  • Income tax return (Form 1040) filing and payment deadline for sole proprietorships and single-member LLCs
  • Income tax return (Form 1120) filing and payment deadline for calendar year C-Corporations and multi-member LLCs that elect to be classified as a corporation
  • Request for automatic six-month extension (Form 7004) filing deadline to extend filing Form 1120
  • Q1 estimated payment deadline for sole proprietorships, single-member LLCs, C-corporations, and multi-member LLCs that elect to be treated as a corporation 

2022 Retirement Plan Limits, Tax Rates, Tax Brackets, and Standard Deductions

The Internal Revenue Service (IRS) has announced cost-of-living adjustments for 2021. Here are a few highlights:

  • 401(k) Deferral Limit – Increases to $20,500 from $19,500
  • 401(k) Catch-up Deferral Limit – No change. Limit stays at $6,500
  • Defined Contribution Plan Maximum Annual Additions – Increases to $61,000 from $58,000 (or $67,500 with catch-up)
  • IRA/Roth IRA Contribution Limit – No change. Remains $6,000
  • IRA/Roth IRA Catch-up Contribution Limit – No change. Remains $1,000
  • Lifetime estate and gift tax exclusion – Increases to $12,060,000 per person from $11,700,000
  • Annual exclusion for tax free non-charitable gifts – Increases to $16,000 from $15,000

The IRS also released the 2022 Tax Tables and Brackets. The rates have not changed but the brackets have been adjusted for cost-of-living increases. The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900 up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400.

For tax year 2022, the top tax rate remains 37% for individual single taxpayers with taxable income (income after deductions) greater than $539,900 ($647,850 for married couples filing jointly).

The other rates are:
35%, for incomes over $215,950 ($431,900 for married couples filing jointly);
32% for incomes over $170,050 ($340,100 for married couples filing jointly);
24% for incomes over $89,075 ($178,150 for married couples filing jointly);
22% for incomes over $41,775 ($83,550 for married couples filing jointly);
12% for incomes over $10,275 ($20,550 for married couples filing jointly).
The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly). 

Please remember to call us: When anything significant happens in your life, including changes in your finances, family, or health that could affect your financial plan, please let us know so that we can adapt our planning and portfolio work for you accordingly. Also, if you ever fail to receive a monthly statement for one of the Schwab Institutional or TD Ameritrade Institutional accounts under our management, please let us know so we may assure the respective custodian delivers your statements promptly.

 Contact Us

Moisand Fitzgerald Tamayo, LLC is an Orlando, Tampa and Melbourne, Florida based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between. If you have any questions or would like to discuss anything further, please give us a call or send us a note. If you are not a client and wish to receive emails notifying you of new posts – no more than once per month – fill out the subscription information in the sidebar to the right. For more frequent updates, follow us on FacebookLinkedIn, or Twitter.  

Important Additional Information & Disclosures

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Moisand Fitzgerald Tamayo, LLC-“MFT”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. 

Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from MFT. 

Please remember that if you are a MFT client, it remains your responsibility to advise MFT, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MFT is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. Tax advice is given only to clients and only when agreed to by MFT. A copy of the MFT’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request.

Please Note: MFT does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to MFT’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Note: Limitations:  While MFT does NOT pay for recognition, awards, or publicity, neither rankings and/or recognition by unaffiliated rating services, publications, or other organizations, nor the achievement of any designation or certification, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if MFT is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers. No ranking or recognition should be construed as a current or past endorsement of MFT by any of its clients.  ANY QUESTIONS: MFT’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including providing the criteria used for any reflected ranking.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your MFT account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your MFT accounts; and, (3) a description of each comparative benchmark/index is available upon request.


About Dan Moisand

Dan Moisand is a fee-only financial advisor with Moisand Fitzgerald Tamayo, LLC. He is a regular contributor for multiple outlets, including Florida Today, MarketWatch, and The Wall Street Journal. His writing and financial advice have also been featured in Financial Planning, Investment Advisor, Wealth Manager/Advising Boomers, Forbes, Smart Money, and The New York Times, among other publications. He is the only two-time winner of the Journal of Financial Planning’s “Call for Papers” competition and has been named a top financial planner and advisor by multiple publications. Investment News named Dan one of the “twenty most influential men and women” in the history of financial planning. He currently serves on the Board of Directors for the CFP (Certified Financial Planner) Board.


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