We have so many ways of avoiding all the “extra” information that comes out way. Think about it for a second – we don’t open any emails that we think are spam, we delete most of our messages without even reading them, we throw away half our mail without opening it, and we fast-forward through television program commercials with our current DVR or Tivo systems.
When it comes to our investment decisions and what to buy, sell or trade, having information is very important. Would you ever think of making a decision without being informed? NO!
Having said that, allow me to provide some information that will help ALL of you when it comes to investing decisions. I like facts vs. fiction. This will help you too.
You can use online trading & technology to help you make smart investments with better than market returns?
DALBAR, a financial services market research firm, states that “investor behaviors continue to fall prey to market forces.” For the 20-year period through 2010, annualized returns for equity investors were 3.83 percent and 2.56 percent for asset allocation fund investors, compared to the S&P 500 return of 9.14 percent, according to DALBAR’s 2011 Quantitative Analysis of Investor Behavior. For the same period, DALBAR reports that fixed income investors earned 1.01 percent, versus the Barclays Aggregate Bond Index annualized return of 6.89 percent.
Online trading allows me to be in control and make better investment decisions.
According to DALBAR, one of the reasons investors fall short in their average return is their reactions to market movements and news. Its study found that investors in stock mutual funds held their funds 3.22 years on average in 2009 versus 3.27 years in 2010. These rates are far short of the number of years needed to benefit from a long-term, buy-and-hold investing strategy according to DALBAR.
What can investors do to break their bad habits? If you’re uncomfortable with dramatic changes in the value of your investments, you may have a low tolerance for risk. You’ll want to keep that in mind as you develop your investment plan. It’s okay to re-evaluate your tolerance for risk over time, especially after the bear market of 2008-2009, but you want to make sure changes are based on your appetite for risk and volatility over the long term, not on today’s emotions.
Another piece of advice: Don’t follow the herd. It’s not a good idea to buy any stock or fund just because everyone else is piling in. Likewise, avoid selling holdings when the market drops. Find some way to tune out the noise of the market. Don’t let greed and fear take over. And don’t tinker with your well-thought-out investment plan. If you stick with your plan and keep your emotions out of your investments, you’ll be rewarded down the road.
WHAT SHOULD YOU DO?:
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