“Sensible retirement planning” series Good decisions take time

The ability to keep your emotions in check is a major factor in successfully providing for your retirement.

byJackie Bauer and James Mazeau 09 Apr 2021
Image: Pia Bublies

There are many behavioral tendencies that can influence financial decision-making and thus jeopardize a successful long-term investment strategy. The last part of our “Sensible retirement planning” series looks at how you can stay as focused as possible.

1: How behavioral tendencies influence us

Decisions can be rational or based on behavioral tendencies, which is why it’s important to understand the mechanisms behind them.

2: Ignoring our age is only human

Financial planning for retirement needs to be long term. Most people know this, but don’t always act accordingly.

3: What you have can also fall in value

Those who save for their retirement want security but sometimes still back the wrong horse, often due to the “cash illusion.”

4: In the long term, only a good strategy works

Anyone who invests in securities in pillar 3a must be aware of the behavioral tendencies that can prevent a successful strategy.

5: Good decisions take time

The ability to keep your emotions in check is a major factor in successfully providing for your retirement.

Being aware of these tendencies and able to analyze them will generally improve the outcome.

How do you make financial decisions? Do you obtain advice from several sources?

When it comes to investments, there are three general things to consider which help reduce the influence of behavioral tendencies:

  • Sound analysis of your initial situation and objective: this is the basis for the development of a robust, long-term investment strategy.
  • Disciplined implementation: do not deviate from your analysis and investment approach, provided they are still valid.
  • Keep your emotions in check: this will protect you from making hasty and often sub-par decisions.

Further measures against behavioral tendencies

Decisions based on emotion and poor reasoning are not the only things that affect our behavioral tendencies. Our environment, upbringing, friends, family and colleagues can also play a role. The media is another influencing factor.

Actively seeking out different opinions is a good way of counteracting behavioral tendencies, though this is easier said than done. One simple approach would be to avoid reading the same blog or newspaper every day and to ask several people for their opinion. When it comes to financial questions, it’s a good idea to contact your bank advisor, as they can provide a summary of information from many different experts. The following points may also be of assistance:

  • Before you make a financial decision, take a step back and think through the scenario before you act.
  • Think carefully about your current situation and how your circumstances could change over time.
  • Be open to new information.
  • Be aware of how your mood could affect your decisions.
  • Search out and evaluate different opinions from friends and consult your UBS advisor.
  • Make a note of their arguments so that you can remind yourself of the reasons for your decisions later on.
  • Define a long-term investment strategy and stick to it.

Has reading our “Sensible retirement planning” series made you aware of tendencies that have influenced your own behavior? If so – congratulations! You've already taken a huge step forward. We recommend you take time to reflect on your previous decisions regarding retirement planning and to get advice.

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Our advisors are experts in retirement provision. Get in touch with them – they look forward to hearing from you.