Home » Uncategorized » Investment, Emotions and the Temple at Delphi*

Investment, Emotions and the Temple at Delphi*

Emotional Finance

Can understanding the psychology of investment behaviour help you outperform the market? Probably not, but it can certainly help reduce the probability that you will under-perform the market. This matters, because the majority of private investors under-perform.

One compelling piece of research evidence comes from a careful analysis, carried out by Dalbar research, of the performance of investors in the USA. During the 20 year period from 1992 to 2012 the S&P index had an average annual return of 8.21%. The average investor earned 4.25%. Investors not only under-performed the market, typically they systematically under-performed the specific assets they were invested in.

How did this happen? It turns out that on average investors mistimed the market, buying high and selling low; undermining their own investment performance.

They also spent too little time invested in assets, churning their portfolios and incurring significant transactions costs in the process. Private investors are often…

View original post 788 more words

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s