The Dangers of Complacency: Optimism Bias and Investment Risks feat. John De Goey

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John De Goey, Senior Investment Advisor and Portfolio Manager at Wellington-Altus Private Wealth joined us for this episode to discuss the dangers of complacency arising from the industy's optimism bias, and how it and other biases threaten to derail the best laid plans of investment and financial planning and the finances of everyday investors. Our conversation covers a range of topics, including John's career in finance, his latest book "Bullshift: How Optimism Bias Threatens Your Finances," and the importance of addressing those biases in your practice and in investing.

Have you ever wondered how being overly optimistic can be detrimental to your investments? If you stop and really think about it for a moment, the financial industry has always had a way of pivoting to the next thing just as the last thing has stopped working. To the industry's credit, plenty of effort has been made to democratize liquid alternatives to the retail market, despite the relatively slow uptake from investors, who for over a decade shunned portfolio diversifiers. As long as stocks and bonds were behaving well, investors felt there was little need for them. Until, that is, 2022, when inflation became increasingly persistent, and central banks began raising rates in the earnest attempt to quell rising prices throughout the economy.

Do you know the potential risks associated with investing in a 60/40 portfolio, in an environment of rising rates and inflation volatility? In this latest episode of our podcast, we had a chance to sit down with seasoned speaker and financial author, John De Goey, a Senior Investment Advisor and Portfolio Manager at Wellington-Altus Private Wealth, to discuss these and other pressing questions about investment strategy.

De Goey has a reputation in the industry for being a consummate thought leader, always striving to be on the cutting edge, with the courage of his convictions, and the courage to speak truth to power, when it comes to what is in the best interest of investors and advisors alike.

Throughout the podcast, De Goey provides insight into many aspects of investment strategy, including the role of advisors as behavioral coaches, the importance of balancing optimism with a dose of realism, and the potential risks of being excessively optimistic. He also highlights the significance of post-mortem analysis, the impact of inflation on portfolio management, and the need to reevaluate investment strategy in the face of a changing market.

To help provide context and deeper understanding, De Goey delves into historical movements of the market and how they have influenced investment strategy. He emphasizes the importance of having a purposeful approach to investments, seeking to manage risk by diversifying portfolios in non-correlated or negatively correlated assets.

In addition, he points out that employing alternative types of products, including liquid alternatives, can further help to reduce volatility and smooth out performance. During the podcast, De Goey also cautions listeners that inflation is a multi-faceted event that is often oversimplified in media reports. He notes that the uncertainty created by inflation can make businesses and investors less willing to take risks, potentially leading to volatile markets.

De Goey encourages investors to examine their investment policy statements and to develop plans for dealing with potential future downturns in the market. In summary, the latest episode of our podcast with John De Goey provides valuable insights into investment strategy and decision making.

From the benefits of sound financial planning to the dangers of excessive optimism, De Goey shares a wealth of knowledge to help advisors and investors alike to navigate their investment journeys with greater confidence and a more informed perspective.


"Planning for Retirement in an Unpredictable Environment": "Don't shoot the messenger. I'm just saying that the reality is that a lot of people will have their clients be disappointed, but their clients are happy now. The disappointment is going to come in 20 or 30 years when they realize that they were 'bullshifted' in 2023." — John De Goey

John De Goey's career path [00:01:37] John De Goey moved to finance after studying public administration, has written books and articles to help consumers understand the industry and have better relationships with advisors.

[00:09:04] Advisors can provide value through behavioral coaching, which helps investors remain grounded and stay invested while being realistic.

[00:19:58] Lower expected returns and longer life expectancies may require more savings and a longer working life to achieve desired retirement lifestyle.

[00:26:00] 40-year bull market in bonds ended in 2022, rates to stay high, need to reassess investing strategies, widely anticipated recession.

[00:40:21] Invest in products with reasonable, risk-adjusted returns and non-correlated weekly returns to maintain optimism for the long run.

[00:45:14] Be prepared with two strategies, each less than 5% exposure; consider 15% allocation to alternatives, plan carefully to avoid large losses.

[01:06:30] CAPE is not good for timing markets; past experience doesn't dictate future outcomes; risk of not paying attention to valuations.

[01:13:18] Central banks need to fight inflation to pivot; pain must be manufactured before pivot is possible.

[01:18:09] Investors may be taking on more risk than they think due to optimism bias and need to reassess, prepare for potential issues, and reflect on their portfolio.

[01:20:41] Advisors must recognize and reflect on their own biases to give better advice.

Where to find John De Goey:

John De Goey on Linkedin
John De Goey at Wellington-Altus Private Wealth

Get the book:

Bullshift: How Optimism Bias Threatens Your Finances

Where to find the RYA Crew:

Rodrigo Gordillo on Linkedin
ReSolve Asset Management

Pierre Daillie on Linkedin

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