The pioneer of the investment of the index, Charley Ellis, says that what has given rise to the success of the index fund remains true today: “It is practically impossible to beat the market,” he said to Bob Pisani of CNBC last Monday “ETF Edge. “”
But Ellis warns against another obstacle as high as long-term underperformance of active management This retains many investors: you could be your worst enemy with regard to your investment strategy.
Market complexities, volatility and an infinite number of other variables can cause unpredictable price fluctuations, but your own state of mind is just as key among the variables that can put your financial portfolio.
In his new book, “Rethinking Investing”, Ellis details a multitude of unconscious biases that have an impact on our thinking about money on the market. Some of the big ones he addresses in the book:
- The player’s error: The conviction that because you were right to choose a stock, you will be right to choose all the other actions.
- Confirmation: Search for information that confirms pre -existing beliefs.
- Herd mentality: Blindly following the actions of a wider group.
- Cost Cost Defense: Continue to invest in failing investments.
- Availability: Be influenced by easily accessible information, whether really precious or not.
The impacts of these biases on your portfolio strategy can be major, says Ellis, and should lead investors to “rethink” their market approach.
“Instead of trying to get more, try to pay less,” he said. “This is why the FNB … had such a great sense.”
Research shows that FNBs generally have lower costs than traditional investment funds actively managedAlthough traditional investment funds such as S&P 500 funds from Avant-garde And Loyalty Also have ultra-basic costs (some are even without management fees).
Ellis maintains that the use of lower prices funds, combined with the abandonment of our behavioral biases, can help investors win years, even decades later.
“They are boring, so we leave them alone, and they train in the long term, very, very generously,” he said.
The longtime expert of the ETF, Dave Nadig, who appeared on “ETF Edge” with Ellis, agreed.
“People trying to predict people are still working terribly,” said Nadig. A long-term investment in an independent fund “helps you overcome a huge number of these biases simply because you will pay less attention,” he added.
He also highlighted the error that many investors make Try the market By timing it, only to eventually surpass yourself. “It is more good days ago than bad days,” said Nadig. “If you miss the 10 best days on the market and have missed the 10 worst days of the market, you are always much worse than if you are invested. Mathematics for this are quite difficult to contest.”
Another state of mind Ellis offered on “ETF Edge” last week for investors focused on sufficient investment for a secure retirement: Start thinking about the social security income flow in a new way.
