Daniel Kahneman's top advice: Don't churn accounts

Mr. Kahneman, an eminent Princeton University psychologist, Nobel laureate says advisors must recognize the cost and futility of betting against the market.

In a wide-ranging speech, the man credited with popularizing the study of how human behavior affects economic decision-making warned advisors that, while their job is to protect confidence, an overconfidence in their ability to predict the markets can hurt their clients.   At Dimensional Fund Advisors we believe it is almost impossible to choose the stocks that outperform. Our Investment philosophy is based on academic research.

Mr. Kahneman said the role of advisors is understanding the frequently irrational biases of their clients..Behavioral research shows that clients have an exaggerated bias against losses as well as a bias that gives them the false sense that the future is predictable.  We believe that managing risk is essential to achieving your long-term financial goals.  Managing risk rather than trying to eliminate it, can result in higher investor returns as well as a better investor experience.

Mr. Kahnenman was asked: "What do you think about active management?"  Mr. Kahneman  in his 2011 book as to the futility of stock-picking in his book,"Thinking Fast and Slow",  said "I'm very interested in not being too active," Mr. Kahneman said.  "I have doubts about active investing."