The securities industry has a vested interest in making investments complicated and opaque. Confusion, obfuscation, fear and anxiety are often the basic tools of its trade. While purportedly “market-beating” brokers and advisors tend to profit handsomely in all market conditions, the performance of the typical investor over the past 20 years has been accurately described as “shockingly poor,” in the words of Business Insider’s Sam Ro.
The average investor’s investments underperformed the returns of almost every asset class, including three-month Treasury bills. Part of the reason for this underperformance is the tendency of investors to buy high and sell low. In times of market volatility, many investors panic and dump their stocks.
Investors also make poor investment choices. They are seduced by the promise of high returns from investment products that are difficult to understand and encumbered with high fees.
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