This is not just a one year phenomenon. Every year the Dalbar company measures how investors performed compared to the capital markets themselves. For the 20-year period from 1988-2007, the US stock market, as measured by the S&P 500 returned 11.81%, but equity investors only earned 4.48%. For the same period, the US bond market, as measured by the Lehman Aggregate Bond Index, gained 7.56%, but fixed income investors earned only 1.55%. In other words, over the past 20 years the stock market outperformed investors by 7.33% and the bond market beat investors by 6.01%. If we’re not shocked, we should be.
At Reeves Independent we don’t like to rest on our laurels. We have studied WHY certain investors have failed previously and have looked at each aspect to make sure that we don’t make any mistakes.
So, what are investors doing wrong? How do they unintentionally sabotage themselves? These are ten broad categories of mistakes that we have seen investors make:
1. They have no strategy
2. Their strategy is to beat the market
3. They don’t hold themselves accountable
4. They listen to the media more than the math
5. They don’t count the impact of costs
6. They let emotions overrule numbers
7. They don’t understand or set a portfolio time horizon
8. They don’t define long term
9. They don’t understand all the risks
10. They measure risk tolerance instead of risk capacity
Follow us on www.twitter.com/reevesIFA and keep checking the Blog where we will be talking about how we have counteracted all of the above to make sure that we offer the best advice possible when you invest.
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