Happy New Year! Everyone wants the best investment results but many go about it the wrong way by picking the recent winners. Mark Hulbert in an article entitled, “The First Shall Be Last” on MarketWatch provides some interesting examples to try and avoid.
Further amplification of this typical investor activity can be studied in the Dalbar Annual Quantitative Analysis of Investor Behavior study. Investors buying and selling decisions routinely give up 5-10% per year of return according to the study of actual cash flows in and out of equity mutual funds.
As pointed out in the the above referenced articles a successful investment strategy seldom works on picking last years winners or even losers. Focusing on strategies over multiple time periods and paying attention to long-term trends are higher probability processes to developing a portfolio that meets the objective desired.
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