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Explore our latest insights on markets, the potential impact on portfolios and investment strategies to help guide clients in today's environment.

Highlights from our January In The Know Webinar

In our flagship virtual event for 2022, we discuss how advisors can help their clients thrive in a new market regime:

A conversation with Larry Fink

BlackRock’s CEO, Founder, and Chairman shares his views on 2022 and beyond.

Thriving in a new market regime

The potential for lower expectations for stocks and negative real returns for bonds put traditional 60/40 portfolios under pressure.

Beyond the 60/40

Our top portfolio managers discuss how alternatives are becoming more accessible, and can help diversify portfolios and amplify returns.

MARTIN SMALL: I’d like to turn now to the last part of our program. We’re very excited to have our special guest, Morgan Housel, author of The Psychology of Money on today, hosted by the gentleman that I’ve referred to as a national treasure here at BlackRock, Mark Peterson, our Director of Investment Strategy and Education. Mark and Morgan, happy new year. Welcome to you both. Mark, I will hand it off to you. Thanks so much.

MARK PETERSON: Great. Thanks, Martin, for that generous introduction. Really excited today to be – to have Morgan Housel, financial journalist and author, with us. His most recent book is The Psychology of Money, which is excellent by the way, and it has to do with how folks think about money and investing and some of the behavioral challenges that they face. 

Clearly last year, you know, we had challenges beyond just money and investing, but I think we’ll look back historically and see that it was one of the worst years ever for investor behavior. If you look at record outflows into equity funds, record cash on the sidelines, and though stock markets still ended up over 18%. Clearly points to behavioral challenges. And we all know that managing our client assets is one thing; managing their behavior is another. 

So, Morgan’s story has really resonated within the walls of BlackRock so much that we wanted to bring him in, share some of those stories with you today, especially some of the ones that are really well-timed for today’s market and the environment. So, Morgan, thanks for joining us. I’ll turn it to you.

MORGAN HOUSEL: Thanks so much, Mark. Good afternoon, everyone. Thanks for having me today. I’m glad we can still do these events, even if we can’t see each other face-to-face like we used to.

But as Mark just said, what I want to talk to you about today is The Psychology of Money, which means I’m not going to tell you where the market’s going next or where the economy’s going next. I just want to talk about what happens inside of our head when we try to make investing decisions and when we think about money.

And I want to start today with a story of two investors, neither of whom knew each other, but their paths crossed in what I think is a very interesting way about ten years ago. The first investor is a lady named Grace Groner. Grace Groner was born just outside of Chicago in 1910 and she had kind of a very difficult life. She was orphaned as a child. She never married. She never had children. She never went to school. She lived in a one room house for her entire life. She worked as a secretary for her entire career. She was, by all accounts from those who knew her, she was a lovely woman, but she had just kind of a very difficult life. 

And Grace Groner died in 2010. She was 100 years old. And when she died, everyone who knew her was shocked to learn that she left $7 million to charity. And everyone who knew her said where did Grace, this orphaned secretary, get $7 million. And they dug through her papers, dug through her accounts and realized that there was no secret. There was no inheritance. There was no lottery winnings. All she did was she took what little she could save from her job as a secretary. She invested it in a couple blue chip stocks, and she left it alone for 80 years and that was her whole story.

The second investor I want to talk to you about today is a guy named Richard. I will leave out his last name. But Richard had almost the exact opposite upbringing of Grace Groner. Very wealthy family. He went to Harvard. He got his MBA from the University of Chicago. He went to work on Wall Street in the 1980s and truly became one of the most successful people in global finance. He was a vice chairman of one of the major investment banks.

He retired in his 40s to pursue charitable activities. That’s how successful he was in his career on Wall Street. Two weeks after Grace Groner died, Richard filed for personal bankruptcy. He told the bankruptcy judge that the financial crisis of 2008 completely wiped him out to such an extent that his only ability to buy food for his family was selling the furniture out of his house. 

And the purpose of the story is not to say be more like Grace, be more like – be less like Richard. That’s not the point here. The point is that there is no other industry that exists where those kind of stories are even possible. There’s no other industry where someone who has no financial background, no education, no experience, no connections, massively outperforms during the same period someone who has the best education, the best background, the best experience. It does not happen in any other field.

It’d impossible to have a story of Grace performing open heart surgery better than a Harvard trained cardiologist. It would never happen. But those stories do happen in investing. And what that shows I think is something very important that’s easy to overlook, which is that good investing is not necessarily about what you know. It’s not about how smart you are or how sophisticated the forecasting models you use are. 

Good investing is overwhelmingly about how you behave. It’s about your relationship with greed and fear, your ability to take a long-term mindset, who you trust, how gullible you are, who – where you seek information. And those are not analytical things. Those are behavioral endeavors. And the thing about behavior that is so important in finance is that behavior is hard to teach, even to really smart people. It’s not analytical. You can’t summarize behavior in charts, in formulas that you can memorize. It’s this kind of soft and mushy topic, so it tends to get swept under the rug in investing, even if it is one of the most important aspects of successful investing.

So, what do we do about that as investors, as financial advisors? To me, I think the only way to wrap your head around behavioral finance and the psychology of money is through stories, stories of real people, real investors dealing with risk, dealing with uncertainty, that hopefully you can empathize with and wrap your head around. So, whether that’s for you or dealing with your clients you can think about the behavioral side of ... productive way.

And so, what I want to do for the rest of my time today is share with you three stories, none of which have anything to do with investing. But all of them, hopefully you will see, have a very clear takeaway about how we as investors and advisors can think about the behavioral side of investing in a more productive way.

And so, the first story I want to share with you today is that timing is meaningless, but time is everything. And like I said, this story has nothing to do with investing. I want to tell you a story about the Wright Brothers. 

Most of you will recognize this picture, December 17, 1903 in Kitty Hawk. This is the first second of the first flight in human history and it’s hard to overstate how important this moment was because the airplane went on to change everything in the world. It changed business. It changed society. It changed geopolitics. It started world wars. It ended world wars. If you had to make a list of the most important innovations of the 20th century, the airplane would be at least top five, if not number one.

And what’s ... is that you don’t need any scientific background to understand how big a deal this was. It’s not like mapping the genome where you need to understand the nuance. This was just a man flying through the sky like a bird for the first time ever. 

So, you can imagine how exciting this moment was and how after this happened everyone came together and said humans can fly now; the world will never be the same; how excited journalists were writing about this moment. Except that’s not at all what happened next. 

This is the front page of the New York Times on December 17, 1903. It’s small print, but you can take my word for it. There’s no mention of the Wright Brothers in there anywhere. This is the next day, on December 18th. No mention anywhere. And the 19th. And the 20th. And the 21st. And the 22nd. You can take my word for it, no mention of what the Wright Brothers are doing anywhere in those new – in those newspapers.

By this time, the Wright Brothers had made six flights. One of them had lasted for 59 seconds, which was a long time back then. And there is no mention of their flights anywhere in the New York Times. 

This kept going for days. It kept going for weeks. It kept going for years. Two years after the Wright Brothers first flew, the New York Times did an interview with a German hot air balloon tycoon and they asked this German hot air tycoon – oh. Looks like I may have frozen here. Let’s see.

And they asked this – okay. So here we are. They asked this German hot air balloon tycoon if humans would ever fly, if men would ever fly in an airplane. And the German air balloon, hot air balloon tycoon said, quote, in the very, very, very far future there may be flying machines but not now, not now. 

This was two years after the Wright Brothers first flew and the New York Times didn’t even know that they had done it yet. It turns out that there was one newspaper that covered the Wright Brothers’ first flight. It was the Dayton Herald in – the Dayton Tribune in Dayton, Ohio, where the Wright Brothers were from. And this is how they cover the first flight: Dayton boys solve problem. And I love how it’s framed, just like a bunch of silly kids doing a science experiment that didn’t have much meaning.

Years later, the editor of this newspaper, his name was Luther Beard, was asked why he was the only journalist in the world to cover the Wright Brothers first flight. And Luther Beard said, quote, I used to chat with them in a friendly way because I sort of felt sorry for them. They seemed like decent enough young men and yet here they were wasting their time day after day on that ridiculous flying machine. So, the only newspaper, the only journalist to cover the Wright Brothers’ first flight did it out of sympathy for these poor kids. 

After Kitty Hawk, the Wright Brothers went back to Dayton, Ohio where they were from and this is where they truly mastered flying. They mastered the two most difficult parts, which were turning and landing. David McCullough wrote a great biography of the Wright Brothers during this time in Dayton and he wrote, quote, no one seemed to notice the miraculous thing happening right in Dayton’s own backyard. There was no sense of wonder of them – of the miraculous thing happening right in Dayton’s own backyard. 

So, look. In due time the Wright Brothers got the credit that they deserved, the recognition that they deserved. But it took decades. It took about five years for the Wright Brothers to build the airplane and another six or seven years for them to get any credit for what they were doing.

And look, when we think about the traits of successful entrepreneurs, we might think of things like ingenuity, their engineering ability, the creativity. Rarely do we think of patience and time horizon as a competitive advantage. But for the Wright Brothers it absolutely was. And to the extent that we do think about patience and time horizon as a competitive advantage, we often massively underestimate how much time is needed to put the odds of success in your favor. And that is also true in investing.

Let me show you what I mean. This shows the maximum and minimum annual returns that you could’ve earned based on different time horizons going back to the 1870s for US equities. What is the most you could’ve earned on an annualized basis and the least you could’ve earned on an annualized basis based off your holding period, if you held stocks for two years or five years or ten years? 

And two things should stick out from this chart. One is that it scales down perfectly over time, so that the longer you hold ... you are to converge on just a pretty good return. The second thing that should stick out that’s really important here is that it is not until you’ve been holding stocks for between 10 and 20 years that ... positive return. 

Now, most investors that you ask will tell you that they are long-term investors. Most investors think they are long-term investors. But if you actually ask most investors what is your definition of long-term, some of them will tell you one year. That’s a long term. Three years, five years, that’s definitely the long-term. Historically, I think a pretty good definition of what long-term investing is, that definition being just every holding period finishes with a positive real return, is something between 10 and 20 years. 

Something else that’s important on this topic is just how counterintuitive the power of compounding can be. This I want to show you is Warren Buffett’s net worth throughout the course of his life based off of his age going back to the time that he was a teenager. And something that’s really interesting that should stick out from this chart is that 99% of Warren Buffett’s net worth came after his 50th birthday. Ninety-seven percent of his net worth came after his 65% birthday. 

That is just how compounding works. t’s not something that takes place in years or even decades but literally lifetimes and that is so easy to overlook if you don’t understand how much time is really needed to have incredibly good investing results.

Two takeaways from this is that we should realize that when progress is measured generationally, results should not be measured quarterly. And I think the single biggest, the central problem that investors have with investing in stocks is underestimating the amount of time that is necessary to put the odds of success in your favor.

Now, the second story that I want to talk to you about today is that risk is what you don’t see. And this too is a story that has nothing to do with investing. I want to tell you a story about Harry Houdini, the famous magician that did most of his work in the United States about 100 years ago. 

Houdini was, of course, known for his escape acts. He would tie himself up in chains or a straitjacket. He would throw himself in a river and escape and the crowds would love it. That’s what he became famous for.

But Houdini actually had another trick that he played on stage whenever he performed. It was the last trick that he performed during every show, which is that he would invite the largest, strongest man in the audience onto stage and he would tell that man to punch him in the stomach as hard as he could. Harry Houdini would stand there, and he would let people punch him in the stomach as hard as they could. His claim to fame was that he could absorb any man’s punches, no matter how big or strong that man was.

One day in 1922, Harry Houdini had finished a show in Canada, and he went backstage after the show and he invited a group of students to come backstage and meet him. One of the students was a guy named Robert Whitehead and Robert Whitehead walked up to Harry Houdini and started punching him in the stomach as hard as he could. He didn’t mean any harm. He wasn’t trying to fight. He just thought he was performing the same trick that he just saw on stage.

Harry Houdini was not prepared to be punched. He didn’t know this was going to happen, so he was not prepared. He was not flexing his solar plexus. He fell to the ground in pain. He said what are you doing? I’m not prepared to be punched right now.

Harry Houdini woke up the next morning, doubled over in pain. His appendix had ruptured, almost certainly from Robert Whitehead’s punches the day before, and Harry Houdini died later that day. This was how he died.

And what’s so interesting to me about this story is that Harry Houdini could survive almost anything as long as he was prepared for it. Wrap him up in chains and he set himself up in chains, throw himself in the East River. He could survive that because he was prepared for it. He had a plan. He knew what was coming. The one thing that he did not see coming, just a college student jabbing him in the stomach, literally killed him. 

So, I think one of the big takeaways for this and for a lot of fields is that risk is what you don’t see. In almost every field, how risky something is depends on whether you are prepared for it, not how big the event is, not how traumatic the event looks is, but just whether people are prepared for it or whether they are surprised for it. And that is also true in investing. It’s also true in the economy.

The biggest risk to the economy is what no one is talking about, because if no one is talking about it, they are not prepared for it and if they are not prepared for it, its risk will be amplified when it arrives. We learned this firsthand in kind of blunt force terms in 2020 when the biggest risk was something that no one was talking about until it arrived. 

You know, we spent, the whole industry spent the better part of the last decade talking about what was the biggest risk to the economy. And we tend to personify these risks. So, people talked about for most of the last decade was this the biggest risk to the economy? Was it Barack Obama and the stimulus packages, the tax hikes of 2013? Was that the biggest risk to the economy? Maybe it was this guy. Was it Ben Bernanke? Was it the money printing after the financial crisis? Was he the biggest risk to the economy? Was it this guy? Was it the trade wars and the policies the last four years? Was Trump the biggest risk to the economy?

We now know that the answer was none of those three things was the biggest risk to the economy. The biggest risk by far was this guy. It was a virus that no one was talking about until it happened, caught almost everyone off-guard and became by far by order of magnitude the biggest risk that we had dealt with in the last decade, if not during our lifetimes. 

And I think if you look historically, this is almost always how it works that the biggest risk in hindsight is the thing that no one was talking about until it arrived. It was never in the newspapers. It was never in – it was never discussed until it arrived.

You know, if you look historically, the risks that people talk about as investors are things like trade wars, next quarter’s earnings, budget deficit forecasts, the election. It’s not that these things are not risky. It’s that people know they’re coming. They by and large have some insight into what might happen. They can weigh the odds of what might happen so when it happens it’s not necessarily a surprise.

But if you look historically at what has actually moved the needle in investment markets and in the economy, it’s things like COVID-19. It’s things like Lehman Brothers couldn’t find a buyer in 2008 that started the great financial crisis. It’s things like September the 11th and Pearl Harbor. 

The common denominator in all these is that no one was talking about them until they occurred. They were not on anyone’s list. They came out of the blue. So, we were not prepared for it. 

Now this can kind of be disheartening for investors to hear that the biggest risk always is what no one is talking about. It kind of feels like you’re taking a fatalistic approach to investing in the economy. But there’s two things I think that people can think about to help themselves in this situation. 

One is to think about risks the way that Californians think about earthquakes, which is the idea of having expectations rather than forecasts. Look, if you live in California you know that earthquakes will be a big part of your future. There’s no way around that. But you don’t know when it’s going to occur. You don’t know when the next earthquake is going to be. You don’t know how big it’s going to be. You don’t know necessarily where it’s going to take place.

So, rather than forecasting the next earthquake, they’re just prepared for one to occur at any given moment. It’s just part of their baseline expectations all the time. And I think thinking about economics and investing risk in the same way can be a good way to get around this world where the biggest risk is what we don’t see.

Look, if I were to say hypothetically the next recession will occur in Q3 2024 – again, I’m just making that up – that’s a forecast. But if I were to say historically there have been two recessions per decade and I expect that to be the case going forward, that’s an expectation and I think it’s a much more reasonable way to think about risk as an investor.

The other thing to think about here is the difference between getting rich and staying rich. They are two very different skills that I think need to be nurtured on their own. Getting rich requires taking a risk, being an optimist, you know, being really optimistic about the future as an investor. Staying rich requires almost the exact opposite. It requires a certain degree of paranoia and conservatism and a realization that historically the short run is almost this continuous chain of bad news and bad – and surprises that are going to hit us, a continuous chain of bear markets and recessions and pandemics that we need to be able to survive long enough financially so that we can enjoy the long-term compounding that comes from our optimistic side. So, that’s the second story I want to talk to you about today. 

The third story is that you can be wrong half the time and still do great. And this is a story about baby brain development, again nothing to do with investing but this will all come back around. If you are a parent, you know that the amount of growth and development that takes place inside of a newborn baby’s brain in the first few years is absolutely extraordinary. 

The average baby is born with about 100 billion brain neurons. Each one of those neurons has about 3,000 synaptic connections, which are these connections to other neurons that forms this web of intelligence inside of a baby’s brain. Maybe when they’re born, that web looks something like this.

By the time the average child is six months old, that has increased from 3,000 to about 6,000 synaptic connections, so a lot of growth in the first few months that’s creating this web of intelligence inside of your brain. By two, by two-years-old, that has increased from about 6,000 to 10,000 synaptic connections. So, in the first two years of life just a lot of growth that’s going on inside of your brain.

And then after two-years-old, something very interesting happens which is that the density of synaptic connections in your brain, the number of connections doesn’t just plateau, it starts to decline. By the time the average child is four years old, they’ve already lost about one-fifth of the synaptic connections that they had in their brain when they were two. By the time the average child is six years old, they have lost about one-third of the connections that they had inside their brain when they were two.

This keeps going on throughout childhood into adolescence into early adulthood. By the time the average person is 25 years old, they have half of the synaptic connection density that they had when they were two. Why does this happen?

Well, it turns out that a lot of the growth and development taking place inside of your brain in your earlier years in life are connections inside of your brain that are redundant, that are not necessary, that are inefficiently wired. Sometimes, these connections in your brain are just completely mis-wired and there’s evidence, particularly in the first few moments of a child’s life, that some babies can smell colors and hear colors because the part of their brain that is processing that information is completely mis-wired.

And so, you go through your early years of life getting rid of ... inefficient and unnecessary connections in your brain. But what’s important about this is that even though what’s going on inside of your head is chaos and loss and destruction of synaptic connections, you’re still getting smarter. A four-year-old is smarter than a two-year-old and a 20-year-old is much smarter than a four-year-old most of the time. We all know a few exceptions.

But this idea that what’s going on inside of your head is chaos and loss and destruction even though you’re getting better is not very intuitive, because you can imagine if you were a parent and you could look inside your child’s brain every day and see that they were losing synaptic connections, you would panic. You would say this doesn’t feel right. Something feels broken. This can’t be how it’s supposed to work, even if that is the normal path of growth over time.

The idea that something can improve while what’s going on inside is chaos and loss and destruction is not intuitive, but we see it in a lot of fields. And one of the fields we see it very often is in investing. Let me show you what I mean.

This is the Russell 3000 Index going back to 1980 and this, look, for a large nation’s economy this is about as good as it gets in terms of returns. Average annual returns of about 12% per year. If we can repeat this over the next 40 years, that’s as good as anyone can expect. This is a great return for an index.

But if you look at what went on inside of the index during this period, how these 3,000 individual components performed during this period, you get a completely different view. What you’ll see is that the median stock in this index underperformed the average by 54 percentage points. Forty percent of the components during this period, 40% of Russell 3000 components over this 40-year period lost money. The majority of those lost all of their money. They went to zero. They didn’t merge. They didn’t get bought out. They effectively went bankrupt, 40% of the components. 

Virtually all of the index returns comes from 7% of components that had extraordinarily high returns. So, here again, you start with the picture of success, an index that’s done very well, and you look at what went on inside of the index during this period and it’s a constant chain of chaos and loss and destruction and companies going out of business.

This also has a big impact on how we think about volatility as investors. This is the S&P 500 going back to its inception in 1957. And again, this too is like the picture of success for a large nation’s stock market. If we can do this again over the next 60 years, no one can hope for any better.

But this I want to show you is when the index was down about 5% from its previous all-time high. Let me see if I can get it here. Let’s see. It looks like it’s not advancing for me here. There we go. That’s when the index is down 5% from its previous all-time high.

Trying to advance this here, sorry. One moment while you bear with me. There we go.

That’s when it’s down 10% from its previous all-time high and that’s – this is when it is down 20% or more from its previous all-time high. So, you start with the picture of success, as good as it gets, and then you layer on the nuance of what happened during this index, to this index during this period and it’s a constant chain of chaos and loss and destruction. 

This is, of course, accentuated if we are talking about individual stocks for a stock picker. This is Netflix returns going back to 2004 and this, again of course, is like the picture of success for any large company. Netflix went up four hundredfold during this period. This is truly as good as it gets for any large cap company.

But these are the losses that you had to endure in percentage terms to achieve those returns over time. And this is why the percentage of investors who have actually held Netflix stock over these 16 years rounds to zero. It is not intuitive to think that on your way to making 400 times your money you’re going to lose 70% of your money three separate times. You’re going to lose 50% of your money on six separate occasions. It’s not an intuitive thing to think about, even that is a normal path of growth over time.

And so, look, I think, you know, one of my favorite quotes comes from Dwight Eisenhower, the famous General and President, who was once asked the definition of a military genius. And Dwight Eisenhower said a military genius is the man who can do the average thing when everyone else around him is losing his mind. And I think it’s the exact same in investing, that good investing is not necessarily about making great decisions. It’s about consistently avoiding mistakes, consistently not – consistently not screwing up and consistently not reacting to the chaos and the loss and the destruction in the short-term that is likely to pull you away from a long-term investing strategy that will earn the highest returns.

Charlie Munger has a great quote that I think summarizes this where he says the first rule of compounding is to never interrupt it unnecessarily. And so, if there’s a common denominator from these stories, it’s that when people tend to think about risk, they usually think about what the market or the economy is going to do to them. What’s the stock market going to do to me? What’s the economy going to do to me as an investor?

I almost think that the best, a better definition of risk is just what you do to yourselves. It’s your own biases. It’s your own misconceptions, your own impatience anchoring to your own unique history that tends to pull you away from a long-term investing strategy. And that can be kind of disheartening for investors to hear that you are your own worst enemy in investing but I’ve often thought is actually one of the most optimistic realizations as an investor, because of course we have no control over what the stock market’s going to do next or the economy’s going to do next. The only thing we have control over as investors is our own behavior and when you realize that the only thing that you can control as an investor is also the most important aspect of investing, that’s actually a pretty optimistic realization. 

So, I want to end my remarks today with a quote from one of my favorite investors, Bill Bonner, who says that investors do not get what they want or what they expect from markets, they get what they deserve. So, thank you for listening to these remarks today. Sorry we had some technical issues there. But I’m happy to have a conversation with Mark now and talk a little bit more about the psychology of money and what we as investors can do during these crazy days when so much has changed in the last year. So, thank you.

MARK PETERSON: Morgan, thanks so much. Agree, stories are such a great way to communicate with clients, especially around behavioral challenges. With the few minutes left that we have, I thought we’d throw some questions at you. First off, with, you know, I mentioned time of the book. Last year it was published. Anything that was surprising in the reaction? I’m sure you get all – reactions all across the board. But was there anything surprising in the reaction to the book last year?

MORGAN HOUSEL: You know, I finished writing the book in January of 2020, so just as the world started changing with COVID. And the publisher came back and said do you want to update this to include parts about COVID? And I said no, because I wanted what’s in the book to be timeless. I wanted it to be as relevant 20 years ago as it’ll be 20 years from now. 

So, there’s nothing in the book on COVID. But a lot of what’s in the book, and I talked about this today in the remarks, is that the biggest risk is what you don’t see. And I wrote about that in the book and I finished writing that in January of 2020 without knowing that at that very moment there was a virus just starting to spread around the world that virtually no one was talking about back then.

So, that was kind of, you know, that kind of reiterated the point in ways that I did not attend. But I also think that particularly what happened last year in terms of the market falling 35% in March and then not just rebounding, not just hitting a new all-time high, but surging if we’re talking about tech stocks, to new highs that look like something out of 1999, which was such emotional whiplash for investors last year that we went through. 

You know, and I was joking last year that 2020 was like a combination of 1932 and 1999 at the same time. And I think that whiplash for people was just hard to wrap your head around. Going from panic to euphoria in weeks or months was really difficult and just kind of reiterated how much our own mindsets and our own views about money and risk and investing returns really matter all the time, but especially in a year like 2020.

MARK PETERSON: Yeah, absolutely. Another thought and question as I read through the book is and I know a lot of advisors would love to put their own stamp on stories. Like, you do a great job coming up with the stories and the book has a ton of them. Any tips or any insight on your process on how you come up with these stories and how you connect them back to investing topics?

MORGAN HOUSEL: I think what’s true is that if something is true in one field, it is probably true in other fields. And if you can find a story of human behavior that you see pop up in many different fields, you see this thing happening in military history and politics and all these unrelated fields, that’s probably – you’ve probably uncovered something that is just fundamental about human behavior and, therefore, it’s also going to apply to investing.

I think it’s important for, you know, what’s been important for me as an investor is just this realization that investing is not the study of finance. It’s the study of how people behave with money. And since it’s a topic of behavior, it – you know, there are lessons that we can learn about investing that come from all different kinds of other fields that also are behavioral fields, like psychology and sociology and political science and military history, all these other things that have nothing to do with investing.

If you can gain insight into how humans think about risk and scarcity and opportunity, then you are gaining something, you’re learning something that is really fundamental to successful investing over time. So, I think if you are only looking at investing and economics through the narrow lens of finance or economics, you’re missing a tremendous amount of what is important out there. And it doesn’t seem like if you are a professional investor, you want to learn about investing and you’re reading a book about political science or biology or physics, you don’t think you’re learning about investing. But I think if you open your mind and realize that investing is just the study of how people make decisions with their money, then there’s so much that you can learn about investing through the lens of other fields and I think that’s where a lot of these stories come from.

MARK PETERSON: Great. Thank you, Morgan. That’s great stuff. Appreciate the time today. I’m sure everybody found it as interesting as I did and helpful and timely.

We here at BlackRock he a lot of support for advisors and their clients around a variety of investing topics and investor behavior resources. I’ll highlight three for you today. 

First off, we have a client approved seminar on the Psychology of Investing, so a little bit different title. But the Psychology of Investing, which is really the beginning course on behavioral finance. And we did it probably more than I’d like to admit last year, but very well-timed as well, very helpful. We got great response from advisors and clients across the country.

Number two, we have our Student of the Market piece that my group puts together that looks at historical observations on what’s happening with the markets, what’s happening with flows, what’s happening with behavior. It often has a behavioral tilt to it. And that comes out monthly, something that is client-approved, so something you can share with your end client.

And third and finally, a lot of our client-approved one pagers and certainly folks have this across the industry. I have some on my bulletin board here today that you can see. Normally I have more pasted up, but that looks a little bit hacky. But a lot of these on pagers do have a behavioral tilt to them, help you tell the stories tied back to the markets and how clients might behave or at least behave wrongly over time.

So, all those things can be resourced or found on the BlackRock website, of course, or in the Resources tab in the webinar environment. So, with that, let me turn it back to Martin. Thanks, everybody, for the time today. Appreciate it.

MARTIN SMALL: Morgan, Mark, thanks so much. That was a really, really terrific session. Those stories are great. I am trying to make sure that nobody punches me in the stomach unexpectedly, as they did Houdini, and as I move through 2021 that’ll be a real victory.

 

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