An Investor Pitfall Show 45

This show begins with a confession. You may have heard before that “Confession is good for the soul.” Well, I have a confession. Historically, I’ve been a curmudgeon when it comes to holidays. It started sometime in adolescence. I continue this story before jumping into a recent study. 

Dalbar is a large financial services market research firm and creates reports on investor behavior. For the last 27 years they have released a yearly study titled “Quantitative Analysis of Investor Behavior (QAIB).”

From the report, “QAIB has measured the effects of investor decisions to buy, sell, and switch into and out of mutual funds over short and long-term time frames. These effects are measured from the perspective of the investor and do not represent the performance of the investments themselves. The results consistently show that the average investor earns less in many cases, much less–than mutual fund performance reports would suggest.”

Much of the report was spent discussing the stock market correction that happened as a result of the Coronavirus. In the first quarter of 2020, the average investor lost -21.93%.

“In response to the to the market crash in March:

30% of investors reallocated assets28% of investors invested more while prices were low26% of investors did nothing15% of investors cashed out”

One last point from the report, “The average investor fails to realize the long-term benefits of asset ownership because they seldom stay invested in any given fund for a long enough period of time.” 

Congress in junction with the Federal Reserve responded quickly by buying bonds, equities, and dropping interest rates to the floor. Without interest rates being around zero percent, our economy would be in dire straits.

It’s unlikely that interest rates will be normalized any time soon. Also, the government is massively spending. We are coming close to $30 trillion of debt. The task for how to allocate your retirement savings has never been more challenging for the average retiree.

The challenge with investing in retirement is how to allocate your assets. We know from Dalbar and other research that for stock market investments to work properly it requires a long time-frame and patience. However, in retirement many people use their savings to supplement their income.

Working with a financial advisor to develop a custom allocation strategy for your needs may be beneficial. If you’d like to discuss this further call our office at 864.641.7955.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Clients Excel, LLC are not affiliated companies. Investing involves risk, including potential loss of principal. Any references to protection, safety, or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the insuring carrier. This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet particular needs of an individual’s situation. Clients Excel is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Clients Excel. The use of logos and/or trademarks of podcast hosting sites are the property of their respective owners and are not an endorsement by those owners of our firm or our program.