Not me, this is what research from Richard Bernstein Advisors shows – that the ‘average’ investor is terrible at investing.
This following chart, which shows returns over 20 years, of various asset classes, proves this…
Here is what Bernstein’s report states –
The performance of the typical investor over this time period is shockingly poor. The average investor has underperformed every category except Asian emerging market and Japanese equities. The average investor even underperformed cash (listed here as 3-month t-bills)!
The average investor underperformed nearly every asset class. They could have improved performance by simply buying and holding any asset class other than Asian emerging market or Japanese equities. Thus, their underperformance suggests investors’ timing of asset allocation decisions must have been particularly poor, i.e., investors consistently bought assets that were overvalued and sold assets that were undervalued.
Even cash has outperformed the ‘average investor’!
So much for the idea of buying stocks to create wealth over the long run – and 20-years is a long term, right?
“What are you saying Vishal?” you may ask. “You yourself ask us to invest in stocks!”
Not at all, my friend!
Safal Niveshak exists not to push you to buy stocks on your own, but to help you with the process of doing it sensibly in case you want to buy stocks on your own.
This is because however I try to deter people saying that direct stock picking is not for everyone, many would continue to do it. So it’s better that they do it sensibly.
Buying quality businesses at sensible prices and owning them for years is what creates wealth over the long run, but how many people do it?
I recently met an old gentleman at my Raipur True Wealth Workshop, who has been in the stock market for 20 years. “But I have never made money!” he confessed.
The irony is that while he has been trading in and out of stocks from these 20 years, he continues to believe in doing the same.
Over that, he surprisingly told me, “I don’t know anything else that works!”
“Does it really work?” was my final reaction.
How I wished I could’ve put that gentleman in touch with someone like R.K. Chandrasekhar, a Safal Niveshak tribe member, who has created wealth using the old school approach – buying stocks of good businesses and sitting on them for 25-30 years.
That’s what really works in the long run. Or to invert – doing anything else, but owning high-quality businesses for the long run, doesn’t work in the stock market.
But still, most people would rather die than think and invest well and sit on their investments for the long term.
Now, when someone asks me – “What’s your advice for the average investor?” my only answer is – “Stop being average.”
‘Average’ investors are terrible at investing, you see. 😉