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Hi guys,

I find this quote from Robert Lichello very true as everyone knows of someone who is a victim to this:

"The investor buys stocks whenever he finds himself with excess funds on his hands, or whenever the mood strikes him, or whenever he comes across a stock tip, or whenever his emotions become inflamed by the general atmosphere of jubilant euphoria that periodically emanates from the financial community. He sells stocks for the opposite reason – when the outlook for the market is grim, he takes his losses and runs. The average investor doesn’t know where he is going, doesn’t know where he’s’ been, and is motivated only by a dim hope that if he keeps moving blindly around the arena, he’ll stumble upon success. Only this never occurs because he never realizes he’s’ a puppet and that unseen strings propel his enthusiasm… his decisions, his stock selections, his every move. His timing is in fact, controlled by others"
 

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Thats too bad what a bummer this guy is. Average is all I ever want to get out of my investments.

Ps theres also a theory of the average investor having the ability to make a higher return % as compared hedge fund managers, etc. At least thats what Peter Lynch thinks.
 

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An average investor should be able to beat fund managers, shouldn't they ?

Given that the fund manager can't very well exit the markets and charge their investors to put the cash into GICs, the private investor are unencumbered by such things.

There are times when exiting the market completely would have paid off handsomely..........like just before the recession really took hold.
 

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I always thought average investors do make money ... just not as much as they could with a little more knowledge on investing.
 

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Are you sure that was Robert who said that? I'm thinking it might have been Ultron - the reference to a puppet and strings is a dead giveaway.
 

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An average investor should be able to beat fund managers, shouldn't they ?
Average investor ... no, average educated investor could but lots of factors will affect performance.


Given that the fund manager can't very well exit the markets and charge their investors to put the cash into GICs, the private investor are unencumbered by such things.
No ... but they can be encumbered by fear or being stuck in a meeting at work ... :biggrin:


There are times when exiting the market completely would have paid off handsomely..........like just before the recession really took hold.
The ones willing to go "all in" are likely not average.



Cheers
 

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I generally set my buy price, and patiently wait. If I come into more money, and am still waiting, I put in an order for more units at my buy price and wait more.....

Pretty simple....
 

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I have "studied" this topic for some years, when I worked as a consultant to help people optimize portfolios and minimize fees.

Here are some reasons, off the top of my head, relating to retail investors
  • Retail investors are almost always over-confident. They're usually unaware, or haven't properly accounted for, risks & pitfalls
  • Investment actions guided by mood, emotion, TV/newspaper shills, etc instead of real research
  • No methodology and poor discipline
  • They take on too much risk for the reward. They make trades that institutional investors won't, e.g. small upside but potential huge downside
  • They don't have exit strategies
  • They are stubborn. e.g. an investment goes against them, they will stick with it instead of acknowledging a mistake and fixing it
  • Too much trading activity, churn, turnover
  • Failure to stick to long term strategy
  • No loss control strategy (institutional will do things like enforcing maximum loss tolerance)
  • Poor tracking of results & performance
  • No critical view of your own performance. Very difficult to do as an individual.
 

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I have "studied" this topic for some years, when I worked as a consultant to help people optimize portfolios and minimize fees.

Here are some reasons, off the top of my head, relating to retail investors
  • Retail investors are almost always over-confident. They're usually unaware, or haven't properly accounted for, risks & pitfalls
  • Investment actions guided by mood, emotion, TV/newspaper shills, etc instead of real research
  • No methodology and poor discipline
  • They take on too much risk for the reward. They make trades that institutional investors won't, e.g. small upside but potential huge downside
  • They don't have exit strategies
  • They are stubborn. e.g. an investment goes against them, they will stick with it instead of acknowledging a mistake and fixing it
  • Too much trading activity, churn, turnover
  • Failure to stick to long term strategy
  • No loss control strategy (institutional will do things like enforcing maximum loss tolerance)
  • Poor tracking of results & performance
  • No critical view of your own performance. Very difficult to do as an individual.

lol we are indeed such a bad lot, aren't we .:peach:

happy friday james4b
 

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I would say two big reasons. The first is churning by the broker, and churning to product with trailers.

The second is something I learned the hard way many years ago. It is a simple saying. Pigs get slaughtered, ie sell when you reach your goal and move on to something else. Never fall in love with a stock until after you have sold it.
 

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lol we are indeed such a bad lot, aren't we .:peach:
Happy Friday to you too! I didn't mean we are a bad lot. I think that professional traders and money managers just use better processes, and checks and balances, than we do!

For instance, a bank or hedge fund will enforce maximum losses or max position size as a matter of process. The value of these checks & balances is clear... look at these cases of rogue traders, who dodged these rules, and the resulting multi-billion $ losses for the banks. Those corporate processes do a GREAT job at keeping their trading profitable as long as they are enforced.

As for failing to be critical of your own investments... we're all going to do that. That's again why corporations use mechanisms like managers or boards to enforce good performance.

Individuals can certainly adopt many of these good practices. I've found that tracking my performance better has been very useful
 

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@ a poker table the money flows to the strongest player/players it does not flow to the average poker player. The market is the same.

How would you like to be the average investor in the best performing mutual fund over the last 10 years ?

Continue latter
 

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A few years ago I read that the best performing mutual fund over the last 10 years ( cant remember exact number but the fund was making gains in the double digits) The average investor in this fund even though they were smart enough or lucky enough to be in the best performing mutual fund. The average investor still lost money because they bought high & sold low.

I forget the name of the fund & who did the study because they were not important to me @ the time. The principal that was important was even though the fund made a lot of money the average investor lost money. Don't be an average investor.
 

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I don't have much of an opinion of the average investor but wanted to thank you for starting a topic that is interesting, doesn't imply that Harper is the reason for all Canada's ills, and that the boomers aren't free riding on the coat tails of what ever the latest generation of unemployed with McDegrees is called. Carry on...Happy Friday!
 

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Being a good investor is all character traits. It has very little to do with number crunching and research. Lots of really smart people are terrible investors.


“Conventional valuation is established by the mass psychology of a large number of ignorant individuals…the market will be subject to waves of optimistic and pessimistic sentiment.” – John Maynard Keynes
 
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