When it comes to investment, human nature gets in the way…

We are inundated with the rantings of television pundits, newsletter gurus and financial press, touting systems that have worked for a few years. There are over 8000 mutual funds today, each aggressively advertising and promoting their products and performance.

The vehicle (the investment vehicle), is important-no doubt, but not as important as the driver... you.

Investing is about patience and expectations. The more knowledge you have about the companies you are invested in, the more comfortable you will be, and the more you will feel like the owner of a real business.....a real investor.

Whether you own shares of stock in a company, or shares of a mutual fund, you are a passive partner in a real and going business. Owners understand their companies, their products or services. They understand the competition, understand their markets. Do they concern themselves about temporary price fluctuation, especially when the cause is not fundamental to their business? When prices are depressed and offer value, they often buy back their own shares.

When it comes to investment, human nature gets in the way…

Here’s some of the historical data:

• During a 5 year period ending December 31, 1995, the average growth mutual fund grew by 12% per year, while the average investor return was 2.5% per year! .investors were buying at the top and selling at the bottom. Money flowed into the funds after they’d had great years, and flowed right back out again when those returns couldn’t be sustained.

• In a variety of surveys, 78% of investors would sell their shares if the market declined 25% or more. But only 20% of investors would buy shares after a 25% decline. Does this sound like a population that wants to buy low and sell high?

• Losing $1 makes investors feel 2 ½ times as bad, as making $1 makes them feel good. The fears of the client drive the investment process more than the knowledge of the investment advisor.