More On Individual Investors Long Term Performance

Another chart courtesy of Blackrock this one showing the longer term costs of many individual investors poor investment decisions.  Here's their take:

"Volatility is often the catalyst for poor decisions at inopportune times. Amidst difficult financial times, emotional instincts often drive investors to take actions that make no rational sense but make perfect emotional sense. Psychological factors such as fear often translate into poor timing of buys and sells. Though portfolio managers expend enormous efforts making investment decisions, investors often give up these extra percentage points in poorly timed decisions. As a result, the average investor underperformed most asset classes over the past 20 years. Investors even underperformed inflation by 0.5%."

I'll point out the real long term lesson from this chart and the one we just posted and that is most people have no business trying to manage their own investments.  They don't understand volatility, they don't understand their own risk-reward parameters and they most often have no realistic ideas of what to expect out of markets.  The real reason you hire somebody such as me is that if that person is any good, he or she will be able to help you do all these things that most of you simply can't do on your own.

Link:  Blackrock.com: Volatility Propels Emotional Investing

*Long ETFs related to the S&P 500 in client and personal accounts.