Burst The Bubble
Investors frequently work within a bubble. While we rely on outside data and analytics, we ultimately interpret the information in a vacuum. This practice is a problem because there is no one to temper our emotional impulses. Our mood is influenced by temporary headlines, short-term political setbacks, and one-day market movements.
All of these events are short-lived, but the consequences can last a lifetime. Research from MFS illustrates how often our impulses are wrong. A chart of S&P 500 performance imposed over a graph of investor inflows shows a sobering dichotomy. Most of the time we’re completely wrong about the timing. Investors commit big dollars at the height of the market. When the market drops further panic sets in, and investors flee. The result creates high costs followed by low returns.
What’s more interesting is that this phenomenon comes at a time of unprecedented access to information. It seems even the most granular data takes a back seat to emotion. Impulsive investing driven by misplaced fear or optimism is costing investors millions. Let’s look closer.
Time Out
Think you can outpace the market? Think again. The problem with emotional investing is that it’s based on the assumption that we know the future. For example, between October of 2004 and September of 2014, the S&P 500 delivered an annualized return of 8.10%. However, if you timed the market and failed to capture the top 12 highest performing months, you would have lost .63% rather than making any money.
This trend also exists between 1994 and 2014 when missing the best 12 months would have earned an investor less than half of what you would get by staying the course. In short: unchecked emotion is expensive. However, the collaborative atmosphere on KINFO can help.
A Shared Experience
KINFO offers users a base of investors eager to share ideas. We work with a team that seeks cooperation, not competition. Therefore, you have the benefit of exploring how other people think and how they perform. Sometimes the best thing for investors is a little outside perspective. At KINFO we’re building this perspective one person at a time.
As our base grows, the aggregate knowledge and experience will grow with it. This emergence creates a collective hive of insight from across the globe. With more users comes more sophistication and a greater international approach.
Step outside your bubble and into KINFO where investors like you (and unlike you) can explore new ideas to get ahead of the market and earn better returns.
