I wanted to take the opportunity this week to introduce you to a section of the website that you may not be aware of called “Must Reads.”
There is no one more invested in your money than you. It is from this viewpoint that I believe you should have a better understanding of the dynamics behind putting your hard earned “savings” at risk.
As I have written previously, Wall Street money managers are a highly conflicted lot. They are incented, because of the extraction of fees, to keep you always invested in the financial markets. The chart below shows the “excuse/rationalization” of portfolio managers over time.
While most portfolio managers have a great strategy for “buying” into the markets, the need to chase performance leads to an inability to “sell” when needed to protect investment capital. The fear of “missing out” on a market advance, or the negative impact of making a wrong “call,” are emotional biases that impair their decision making over the long-term. This is why the vast majority of mutual funds perform relative to their benchmark index despite their stated goals of expecting to outperform.
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