I've been framed!

I'm no politician, but I've heard a rumor that in a debate, the person who frames the issue often wins (like prisoners who are smarter than Harvard grads).

Not just in debates does framing determine success. In investing, your framework can be what matters most. 

Framing is a cognitive bias--an error in our logic. Thaler and Kahneman, the psychologists/economists whose writings I often quote, explain it best.

The framing effect is an example of cognitive bias, in which people react to a particular choice in different ways depending on how it is presented; e.g. as a loss or as a gain.

Think about framing when you look at your third quarter statements. The more money you have in the stock market, the lower your account value over these three months. What does this mean to your long-term financial plans?

If you view this dip as a blip, which it inevitably will be, you're potentially earning the returns that stock markets give over long periods of time.

If you feel fearful, ask yourself a very powerful question, compliments of Nick Murray:

Do I really believe that the enduring values of these businesses have suffered long-term impairment of anything like eleven percent just in these seven days?

That framework brings great clarity to my investment picture. Does it help you? If you would like to read more, e-mail me at margo@assetsandincome.com (we are not permitted to post here) and I'll send it to you via e-mail.

All of you, make it a wonderful week. Give us a call with any questions, at any time, and don't let the financial panic du jour limit your joy or your long-term investment success!

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