Avoid Self-Destructive Investor Behavior

“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

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