From 1991-2010, the average S&P 500
return was 9.14% yet the typical stock investor earned only 3.83%/year. The DALBAR study reports that investors under-perform
the market because they buy high and sell low.
"Many people behave badly when it relates to their investments. They
panic when stock prices fall and sell when they shouldn't. Or they might
purchase a hot gold-mining stock after gold prices have already
skyrocketed. Essentially, investors tend to buy and sell at the wrong
time.
We've seen plenty of evidence investors like to chase performance.
People piled into technology stocks in 1999 and early 2000 after the
sector posted strong gains in the prior four years as consumers and
businesses increased their use of the Internet. Then the dot-com bubble
burst in March 2000, sending tech stocks sharply lower. Likewise, in
2006, homes in the Sun Belt were selling like hot cakes as housing
prices were peaking. By March 2007, sales and values of homes around
the country were falling dramatically, ending the housing boom." Read more: http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2011/05/03/investors-dont-follow-the-herd?utm_source=Oct+2012+David+Swapp&utm_campaign=Dave+Oct&utm_medium=email
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