Successful Investing is Simple, But it isn’t Easy

By on September 30, 2010

Brett Arends highlights a study by TrimTabs Investment Research showing investors buy high and sell low.

A remarkable new study from TrimTabs Investment Research shows that regular investors needlessly lost billions more than they should have on the stock market. Why? It’s the old story: They invested more money in their equity mutual funds during the booms … and then sold them during the panics.

So even though Wall Street overall ended the decade pretty much level (when you include dividends), average investors lost a bundle. TrimTabs puts the losses at $39 billion. It calculates that mutual fund investors bought into the Standard & Poor’s 500-stock index at an average of 1,434. That’s close to its record high of 1,565. If investors had invested at random times instead, their average purchase price would have been 1,171.

The lesson is that for investors to outperform they must do the opposite of the majority of other investors. Of course, this is easier said than done.

Source: Yahoo! Finance
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