You're Behaving Badly

You’re focused on the wrong thing.

The media would have you believe that fees are the most important factor when it comes to investing. When in fact research has proven that investor behaviour, specifically the timing of investments, is the most important factor. Human nature.

Passively invested funds are gaining huge popularity among investors. They are being drawn by the lure of the low-cost management fees in passively managed portfolios and exchange traded funds.

The worlds electronically traded funds and portfolios have reached over 4 trillion dollars in assets. There are now over 328 ETF providers in over 78 exchanges and 50 countries. Canada has not been immune to this phenomenon. We have over $130 Billion in passively managed assets in the Canadian marketplace. The number doubled from 2008 to 2010 and much of the growth has been in the last year.

In the 15- year period ending December 2016, the average active investor faired only 4.04%. The passive investor even less – 2.85%. Far less than the average index performed. And this is because when comparing investor returns to index returns, Dalbar took into account the flows of money – when investors bought and sold.

The tendency is for you to sell when markets fall out of favour and put off purchasing until markets are well on the upswing. You’re behaving badly – from an investment perspective anyway.

For more proof you’re focused on the wrong things read In Case You Forgot Rule Number One & Is This Your Doctor?

Copyright KAV Wealth Strategies