Avoid Self-Destructive Investor Behavior

Charles Munger is Vice Chairman of Berkshire Hathaway.  Munger and Warren Buffett are viewed by many as the best investment team in the country.  He provided some excellent investment insight:

“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments.  You need to keep raw emotions under control.”

Dalbar, Inc. has studied the returns of the average stock fund investor and compared it to the average stock fund.  Over the last 20 years investors sacrificed nearly half of their potential returns by making elementary mistakes such as:

  • Trying to time the market – thinking you can get out before a market decline and get back in when the market is down.  It never seems to work.
  • Chasing hot investments – from chasing internet stocks in the 1990s to real estate ten years later often leads to financial disaster.
  • Abandoning investment plans – if you have a strategy, and it’s sound, stick with it for the long term.
  • Avoiding out-of-favor areas – for some reason, people want bargains in the store but avoid them in the market.  Don’t be part of the herd.

Few amateur investors have the training or discipline that allows them to avoid these costly mistakes.  One of the most important services that a trusted investment manager can provide is to remain disciplined, stick with the plan, remember the goal and focus on the long term.

For more information about professional investment management visit Korving & Co.

Korving & Co. is a fee-only Registered Investment Advisor (RIA) offering unbiased investment advice.

Arie and Stephen Korving are CERTIFIED FINANCIAL PLANNER™ professionals.

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