Outperforming 99% of Your Neighbors
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A recent study by DALBAR showed investors on average have a very strong track record, unfortunately it's a track record of making the wrong investment decisions at the wrong time.
Media headlines are already reminding investors of the terrible things that happen to the stock market in the months of September and October. Compounding the problem is all the negativity that we must endure before the November elections. Bottomline: Don't be tempted to "fiddle" with your investments because of this noise!
According to Dalbar, for the last 20 years ending in 2009, the S&P 500 returned 8.10%. Over the same time span, the average stock investor barely beat inflation (2.8%) with an annualized return of 3.17%. This difference in performance is called "The Behavior Gap."
Investment returns are the numbers you read in the paper. These numbers assume that you do not buy and sell your investment. You do not change your mind and trade to another fund or switch advisers.
Investor returns measure your real life returns. These are the returns you earn as you buy and sell your investments to "fine tune" your portfolio to the "current investment climate" or chase the next "sure-bet stock or hot-hand mutual fund".
Bottomline: Your obsession or your adviser's "diligence" in following the financial news and "tweaking" your portfolio is killing performance when you can least afford it. This well-intentioned search for the best investment or attempts to avoid the bear markets has the average investor underperforming the stock market by 4.92% per year. Ouch!
The Lesson: Investment success is not about skill - its about BEHAVIOR. Outperforming your neighbor is not about finding better investments, it is about better behavior.
Our Job - Not finding great investments...Creating great investors  |
Focus on what you can control...your behavior...not the time of the year...not who wins the election...not what the housing market is doing...not the unemployment numbers! Focus on the simple, but not easy, task of becoming a better investor and let us empower you to be that Great Investor!
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