Three Common Investment Mistakes and How to Avoid Them
SJS Investment Services' disciplined process saves investors from emotional investing
Jul 31, 2015, 09:00 ET
SYLVANIA, Ohio, July 31, 2015 /PRNewswire/ -- It's all too easy to make the wrong moves when it comes to investing, but according to SJS Investment Services, a Registered Investment Advisor and creator of MarketPlus® Investing, avoiding three common mistakes can improve investors' chances of having more favorable outcomes.
With all the financial information available, it seems as if anyone could invest on their own and keep pace with the market. However, 30 years of data show individual investors' portfolio performance trails overall market performance. The 2015 edition of the "Quantitative Analysis of Investor Behavior" performed by DALBAR, a financial services research firm, showed in 2014 that the S&P 500 was up about 13.7%, while the average do-it-yourself equity mutual fund investor earned an average 5.5% return. Over the 30 years ending December 2014, the S&P 500 gained 11% annually; the do-it-yourselfer earned less than 4%.
SJS Investment Services explains the earnings disparity using roughly two decades' worth of listening to clients and their investing woes. "People aren't all that different when it comes to investing on their own. They are emotional," said Scott Savage, founder and CEO. "They buy when the market is high, sell when it's low. Then they repeat until they are out of money." This behavior is the result of three common mistakes:
- Timing the Market
People think attempting to get in when the market is low and get out when the market is high is the best way to improve performance. "Not so," says Savage, who calls this a "fool's errand and a costly decision."
- Stock Picking
People often try to roll the dice and pick one, two, or a handful of stocks that they think are going to outperform the market. SJS recommends designing a portfolio diversified across and within asset classes as a way to minimize risk and capture the market's upside potential.
- Chasing Performance
People often choose an investment based on past or current performance with the assumption that it will continue. In the study, "Luck vs. Skill in the Cross Section of Mutual Fund Returns," published in the October 2010 issue of the Journal of Finance, authors Eugene Fama and Kenneth French showed that active fund managers cannot accurately speculate on where individual prices are going to go and systematically beat the market.
MarketPlus Investing helps investors remove the emotion from investing and maintain discipline. "It is about science, not the hype of believing you can 'beat' the market," said Kevin Kelly, SJS Investment Services president.
Savage admits the common sense process isn't very glamorous, and that most of the investment world is doing the near opposite. Many people believe that stock picking, market timing, and chasing performance is how investing should be done. But at SJS Investment Services, it's done through science and discipline, which is how they and their clients prefer it.
Persons interested in learning more about MarketPlus Investing can visit the company website at www.sjsinvest.com.
About SJS Investment Services
SJS Investment Services is an investment advisory firm that has been advising people, families, organizations and communities, managing their assets, and in general being there for them since 1995. The firm accomplishes this through its proprietary process called MarketPlus® Investing and by putting people first in all they do. SJS Investment Services works nationwide and serves individual investors, institutional investors, corporations, financial institutions, and public entities. The company is headquartered in Sylvania, Ohio. For more information, visit www.sjsinvest.com.
SOURCE SJS Investment Services