You Can't Handle The Risk
When I ask clients if they can handle risk, they usually say yes. Well let’s test that hypothesis then shall we. In 2008 did you get into the market or out of the market? If you got out of the market, then you can’t handle risk. If you invested more, you can handle risk.
For the twenty years ending December 31st, 2015, the S&P 500 Index averaged 9.85% a year. Seems decent enough?
The average equity fund investor however earned only 5.19%.
Why? Investor behavior. Investors can’t handle the risk. They get out when markets are down locking in their losses.