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Did you know that investors tend to repeat the same mistakes time and time again?
It’s true. And it’s not just us, Hong Kong investors, that are guilty of that. Investors all over the world are just as guilty.
The common mistakes include overconfidence, overtrading and following the herd.
Apart from those, there is a fourth.
It is a misguided belief that all professional money managers can beat the market.
Truth is, many can’t.
According to a Standard & Poor’s Spiva survey, around 50% of managed funds are beaten by their benchmarks.
So, with odds that are no better than flipping a coin, why do so many private investors still make the mistake of handing over their money to fund managers?
And if you thought the one-year statistics were awful, they get even worse over time. Over a ten-year period, only one in six manage to beat the benchmark.
Those are not great odds. However, I will admit that some fund managers are very good at what they do.
In the main, these managers tend to be more cynical, more sceptical and more contrarian than their peers.
They tend to be hard-nosed and strong-willed enough to hold their nerve when markets go against them.
As private investors we, too, can develop those same traits that should help us on our way to become better investors.
That’s because the key to successful investing is not rocket science…
It is simply to buy shares in good companies; never be overconfident; avoid overtrading and don’t follow the crowd.
By handling your own investments, we can save on exorbitant charges, which, by the way, is why many professional managers fail to beat the market.
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