Zen and the science of disciplined investing

Steve Weisner - Independent Financial Adviser Radcliffe & Newlands

Incredible as it may seem, one of the most important jobs of a financial adviser is simply to stop clients from making foolish decisions. You see the fact is that most investors portfolios perform considerably worse than the market average.

There’s a simple reason for this discrepancy: investor behaviour. We like to follow the herd chasing performance and then we panic when we’re losing. Please do not panic.

Next time you see some investment advertising ask yourself a question – is there anybody selling a fund that doesn’t mention the past performance? They quote returns because that’s what investors look for when selecting funds. When something has
shown excellent performance for the last 7 years what do you expect it will do next? Do you think it will keep going up or will it come down?

You may already have heard the phrase reversion to the mean. What it means is that things tend to oscillate around the average. With this in mind is it wise to buy based on recent success? Probably not. Is it wise to sell something because it has just gone
down? I’ll let you decide.

What is certain is that the average investor fares much worse than the market average. In comparison, the disciplined investor can expect much reduced risk and higher gains. I’ll explain more inside but for now just take a look at these statistics. They’re from
the US but illustrate the point nicely.  Comparison of two investors from 1988 to 2007, investing $10,000 each:

Avergage investor return: $24,011
Systematic investor return: $31,036

Source: Dalbar, ‘Quantitative Analysis of Investor Behaviour 2008’

Steve Weisner
Independent Financial Adviser
Radcliffe & Newlands
5th Floor Crystal Gate
28-30 Worship Street
London
EC2A 2AH  

Tel: 020 7382 0437
Fax: 0207 374 0462
Email: SWeisner@myeggnest.com
www.rad-new.com

If you have a question or if you would like to discuss becoming a client with Radcliffe & Newlands then do please complete the very short form on the right hand column of this page.

You will usually get an answer within 24 hours except during the weekend or bank holidays.

Other Investment Articles

Are pensions worthwhile?

I want to build a portfolio where do I start?

Introducing Investment Bonds

Is a SIPP for me?

Little and often for a big reward

The Rise and Fall of the equity market

Bookmark this page

What is Social bookmarking? Social bookmarking allows users to save and categorise a personal collection of bookmarks and share them with others. This is different to using your own browser bookmarks which are available using the menus within your web browser. Click on the "Bookmark" link above to share this article on the social bookmarking site of your choice. Read more about social bookmarking at Wikipedia - Social Bookmarking

back to top