Sound Financial Group Blog
Latest opinion and views on whats happening in the world of financial planning, wealth management and independent financial advice. Please feel free to leave your comments or start a discussion. Please note: all comments and discussions will be moderated prior to publishing.
As human beings we are programmed to behave in ways that help us survive, not to make good investment decisions…
Investing and self-harming... are probably not words that many of us expect to be seen within the same sentence. However, as we have previously mentioned on more than a few occasions, most investors are likely to do themselves more harm than good and the latest figures from the United States again bear this out.
Dalbar Inc and Lipper have updated their figures to the end of 2010 that show what we have all known for some time, that left to their own devices, the average investor will not only underperform the ‘market’, but he will also underperform, by a wide margin, his/her own investments!
Investment returns over 20 years ending 2010 show that the average stock/share fund return was 9.9% per annum, with dividends reinvested.
The average stock fund investor return was just 3.8% per annum.
To use the American vernacular, there is a massive ‘disconnect’ here.
The reasons for this massive disparity are many and include too frequent trading, attempting to time the markets, chasing investment ‘fads’ (today’s fad is tomorrow’s tank-top) and high costs/charges.
So we repeat...the dominant determinant of long-term, real-life investment outcomes is not investment performance...it is investor behaviour.
As the legendary investor Benjamin Graham stated ...”The investor’s chief problem – even his worst enemy – is likely to be himself”.
If you wish to discuss your own investment planning strategy or would just like a second opinion on your current arrangements, please contact us and take advantage of a no cost or obligation meeting.
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