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Signal Vs. Noise: Is Noise Affecting Your Ability To Focus On Investor Behavior?

Mar. 05, 2020 9:40 AM ET
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Russell Investments


  • If you look at the stars in the market over the past decade, you see a constant change in the biggest stocks in the world.
  • Over the next five years, the International Monetary Fund (IMF) World Economic Outlook projects that both gross domestic product and overall population will increase at a significantly larger rate in the developing world than in the world's major advanced economies.
  • If you been in the business for less than 10 years, you may think growth stocks are the be-all and end-all. However, that has not always been the case.

Originally published on February 18, 2020

This is going to be one of those years where we believe behavior-for advisors and clients-is going to really matter. At Russell Investments, we believe one of the biggest detriments to a client's return is their own behavior. During our decades of working in this industry, we've heard directly that most advisors spend the bulk of their time trying to minimize their clients' behavioral mistakes, especially when markets become volatile. Most advisors know far too well that investors don't always do what they should. Instead, sometimes their behavior stands in direct opposition to their own best interests.

You have probably heard the term signal vs. noise. What this means is there's a lot of information out there that is not very relevant (the noise) behavior-and that you should likely be paying attention to more useful information (the signal).

Here are some thoughts on which signals we believe are likely to be important for advisors and their clients this year:

S - Stars eventually fade

I - International still exits

G - Growth is not the only answer

N - Never confuse your politics with your plan

A - Always keep your outcome in mind

L - Lucky to be alive during this time in history

Let's look at each.

Stars eventually fade

Stars, on average, can last about 10 billion years, but even the brightest stars fade out. If you look at the stars in the market over the past decade, you see a constant change in the biggest stocks in the world. There is an old adage, "The cure for high prices is high(er) prices." Here's another way to look at this: In order for the large stocks to remain large, they have to keep knocking it out of the park. In other words, they have to continue to beat growth and earnings expectations, time and time

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Russell Investments profile picture
Russell Investments is a leading global investment solutions firm with $326.9 billion in assets under management (as of 3/31/2021) and $2.8 trillion in assets under advisement (as of 12/31/2020) for clients in 32 countries, The firm provides a wide range of investment capabilities to institutional investors, financial intermediaries, and individual investors around the world. Building on an 85-year legacy of continuous innovation to deliver exceptional value to clients, Russell Investments works every day to improve people’s financial security. Headquartered in Seattle, Washington, Russell Investments has offices in 19 cities around the world, including in New York, London, Tokyo, and Shanghai.  Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with minority stakes held by funds managed by Reverence Capital Partners, Russell Investments' management and Hamilton Lane Incorporated.Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the “FTSE RUSSELL” brand.

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