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www.insideHALTON.com | OAKVILLE BEAVER | Thursday, September 3, 2015 | 16 Y Humans are their own worst enemy when it comes to investing Dollars & Sense Peter Watson Guest Contributor our investments will perform poorly. They always have and they always will. The common ingredient for many investors is to predict the future. The idea is to understand what will happen and then invest accordingly and have investment success. Today, we offer our own prediction. You will fail. To be more precise you will fail by a lot. Your investment results over the coming years will be signi cantly less than if you had just blindly purchased a diversi ed portfolio and held it for the long term. There are many different sources of evidence that support the fact that humans are very poor investors. Studies show that individual investor per- formance is signi cantly less than results for the markets they invest in. This is true in Canada and it is true in the U.S. The common denominator is the individual investor. How can this be possible? If you invest in equities and those stocks increase in value over time then how is it possible that you do not participate fully in halton.ca 311 NOTICE OF CONSTRUCTION Sanitary Lateral Transfer from Rear Lot Easements to Maurice Drive and Felan Avenue in the Town of Oakville those increases? Identifying the problem is as simple as looking in the mirror. You are the problem and our prediction is you will continue to be the problem. Individual investors are their own worst enemy. They invest logically for the long term and then emotionally change their mind in the short term. People buy high after the markets have appreciated in value when they are con dent and sell after their investments have declined in value because of a market downturn. That is exactly opposite to what we all know, which is buy low and sell high. Better still, we believe strongly in a buyand-hold strategy. Research proves this works best time after time. One of my favourite sources of information on how poorly investors manage their own portfolios was data provided by one of the largest mutual fund companies in the U.S. We used this information in one of our previous columns. The company looked at the investment results from orphan accounts. These are accounts where investors had moved and not changed their address, so the regular investment statements were returned. The signi cance is the investors had forgotten about their investment and therefore were not doing the normal human thing, which is over-managing their accounts. They did not attempt to time the market like most people. The investment results for those orphan accounts were better than for all others. The conclusion is that over time investments do ne and when investors are actively involved the results suffer. Philip Zimbardo who is the co-author of the book Time Paradox has an interesting perspective. He said that our world has changed dramatically in the past 150 years and by contrast it took millions of years for humans to evolve and we have not changed very much in the past 150,000 years. That is a polite way of saying that we humans have passed our best before date. Our world has changed, but we have not. There are two contrasting ways to invest. The rst is to invest according to the evidence and to maintain a disciplined approach. The other way is to invest like a human. We believe there is a lot of evolution to be done for investors and in the meantime we should try and protect ourselves from ourselves. Our recommendation is to follow an evidenced-based approach to investing -- invest for the long term and be disciplined. -- Submitted by Peter Watson, MBA, CFP , R.F .P ., CIM, FCSI., Certi ed Financial Planner Certified Auto Glass Technicians with 22 years of experience All windshield,door & back glass in stock We pay up to 100% of insurance Deductible · We deal directly with your Insurance Company · Life time Warranty against leaks · Stone chip repairs · Free Mobile Service · Free Pickup & Drop OFF d rs n this a Mentio dshield wipe in w e dels e o r F m t d and ge s to most make an Applie 281 Speers Road Oakville ON n El iza be ye th cr W of ay tR d Contract number: Scheduled start date: Scheduled completion date: Project Manager: 030915 Please contact us as soon as possible if you have any accessibility needs at Halton Region events or meetings. Sp ee r sR S-2940-15 August 24, 2015 November 30, 2015 Milan Njegovan 905-825-6000 x 7682 Milan.Njegovan@halton.ca 905.339.0339 1.855.339.0339 www.speersautoglass.ca Ke rr St ee Qu rv al Dr oa d Do . W