Rewarded for being lazy

By Sketch Guy via http://www.nytimes.com/   Article

The Best Investment Strategy? Getting Out of Our Own Way

“The behavior gap is the difference between what the average investment returned and what the average investor earned. … Who would buy a long-term investment and actually hold on to it for the long term? That would be silly! Most people buy and sell. … Today, we hold our stock investments for about six months. We’re clearly not what anyone would think of as long-term investors. …

As Morningstar’s data shows, the average equity mutual fund in the United States had a 10-year average return at the end of 2013 of 8.18 percent. The average investor only earned 6.52 percent. That’s a difference of 1.66 percentage points. …

Balanced mutual funds are designed to help us manage our behavior by including both stocks and bonds. They provide a cushion in down markets in exchange for not hitting it out of the park on the way up. … the average balanced fund returned 6.93 percent, but the average investor only managed 4.81 percent. …

The hard part of investing isn’t picking the best investment. Instead, it’s sticking with the one we’ve picked. Only then will we have a shot at closing the behavior gap over the next 10 years. …

It reminds me of my favorite Warren Buffett quote: ‘Benign neglect, bordering on sloth, remains the hallmark of our investment process.’ As he’s demonstrated more than once, investing is one place where we are rewarded for being lazy.”

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