How to beat the experts at investing (including Warren Buffett).


Definitely, people who buy and sell mutual funds based on reading their annual returns will lag the market. People buy funds that have done great and sell those that lag – the very definition of buying high and selling low.

wealth from thirty

Screenshot 2017-05-20 11.44.58 Performance of US Shares (S&P500; yellow), Australian Shares (blue), International Shares (orange) and Australian Bonds (brown) since 1970. Source: Vanguard Investments Australia.

As a bit of light reading this week, I perused an investor newsletter by Mike Taylor, CEO & CIO of Pie Funds (Pie Funds is a small New Zealand funds management firm). Mike recalled the story of how Peter Lynch wondered what return investors in the fund which he managed – Fidelity Magellan – were  getting versus the fund’s actual return. During the period 1981-1990, the fund returned a very decent 21.8% p.a. The average individual investor however, actually achieved an annual return of 13.4%.

How can an investment in such a stellar fund perform so poorly on a relative basis?

Lynch noted that due to their buying after a period of strong performance and selling  after relative poor performance, investors were doomed to substantially lag behind the fund.

Taylor…

View original post 158 more words

Comments appreciated! What are your thoughts? Questions?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s