“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments.”
– Charlie Munger, Vice Chairman – Berkshire Hathaway
Most investors don’t receive the returns they should. Why? Human emotions.
According to a March 2015 study by Dalbar, Inc. and Lipper, the average stock fund returned 9.1% annually from 1995 to 2014, yet the average investor in stock funds earned only 5.2%.
Why the underperformance?
Investors lost almost half the potential return by engaging in self destructive behaviors such as;
timing the market, chasing hot fund managers or investments, not sticking to investment plans, and panic selling.
Long-term wealth is built by systemeatically investing and controlling the emotions of fear and greed. One of the most important services a trusted financial advisor can provide is to help their clients remain disciplined, unemotional, and focused on long-term outcomes.
Source: Quantitative Analysis of Investor Behavior (March 2015) by Dalbar, Inc and Lipper