{"id":40642,"date":"2017-10-25T09:50:24","date_gmt":"2017-10-25T13:50:24","guid":{"rendered":"http:\/\/www.technologyinvestor.com\/?p=40642"},"modified":"2017-10-25T09:50:24","modified_gmt":"2017-10-25T13:50:24","slug":"we-stink-at-investing-says-latest-report-maybe","status":"publish","type":"post","link":"https:\/\/www.technologyinvestor.com\/?p=40642","title":{"rendered":"We stink at investing, says latest report. Maybe."},"content":{"rendered":"

MarketWatch<\/em> has the inevitable depressing article<\/p>\n

Americans are still terrible at investing, annual study once again shows
\n<\/strong>It’s not about fees or unscrupulous advisers — it’s that we lack the patience to hold investments for more than a few years<\/em><\/p>\n

The key findings of the study show that:<\/p>\n

\u0007 The average equity mutual fund investor underperformed the S&P 500 Index SPX, by a margin of 4.7%. While the broader market made gains of 11.96%, the average equity investor’s return was only 7.26%.<\/p>\n

\u0007 The average fixed-income mutual fund investor underperformed the Bloomberg Barclays Aggregate Bond Index by a margin of 1.42%. The broader bond market realized a return of 2.65%, while the average fixed-income fund investor’s return was 1.23%.<\/p>\n

\u0007 Equity fund retention rates decreased materially, from 4.1 years to 3.8 years. (This is directly related to psychology and behavior.)<\/p>\n

\u0007 The 20-year annualized S&P 500 return was 7.68%, and the average equity fund investor’s was only 4.79%, a gap of 2.89%.<\/p>\n

In short, it’s all about our miserable psychology<\/p>\n

Dalbar (the study’s author) defined nine of the irrational investment behaviors:<\/p>\n

+ Loss aversion: The fear of loss leads to a withdrawal of capital at the worst possible time. Also known as “panic selling.”<\/p>\n

+ Narrow framing: Making decisions about one part of the portfolio without considering the effects on the total.<\/p>\n

+ Anchoring: The process of remaining focused on what happened previously and not adapting to a changing market.<\/p>\n

+ Mental accounting: Separating performance of investments mentally to justify success and failure.<\/p>\n

+ Lack of diversification: Believing a portfolio is diversified when in fact it is a highly correlated pool of assets.<\/p>\n

+ Herding: Following what everyone else is doing. Leads to “buy high\/sell low.”<\/p>\n

+ Regret: Not performing a necessary action due to the regret of a previous failure.<\/p>\n

+ Media response: The media have a bias to optimism to sell products from advertisers.<\/p>\n

+ Optimism: Overly optimistic assumptions tend to lead to dramatic reversions when met with reality.<\/p>\n

The biggest of those problems for individuals are the herding effect and loss aversion, neatly summed up in this chart.<\/p>\n

\"InvestorSentimentChart\"<\/a><\/p>\n

Author of the\u00a0MarketWatch<\/em>\u00a0piece is Lance Roberts who has a raft of financial products and money management services. The MarketWatch piece is\u00a0here.<\/a>\u00a0<\/strong><\/p>\n

Harry’s takeaway: Index funds and ETFs work. As does a little fun — Square and FANG, and some Berkshire Hathaway for good measure. See my list in the right hand column: Here.<\/strong><\/a><\/p>\n

Most important: Don’t panic when there’s a blip. I do, but I’m learning, albeit slowly.<\/p>\n

Encourage your kids to go into AI (Artificial Intelligence)<\/strong><\/span><\/p>\n

From the New York Times:<\/p>\n

\"AISalaries\"
\n<\/a>For the article, click here.<\/a>\u00a0<\/strong><\/p>\n

There’s also a huge piece in the November issue of Fast Company<\/em>: The Great AI War of 2018<\/strong>.<\/p>\n

Here’s a summary. What Fast Company<\/em> calls its One Minute Read.<\/em><\/p>\n

Six years ago, Fast Company`s editorial team had an insight: that Amazon, Apple, Facebook, and Google were increasingly expanding into contiguous businesses. Their competition, we believed, was pushing all of them to be even more ambitious-and pushing everyone else to innovate at a faster rate. We called this “The Great Tech War of 2012” in a cover story that set the framework for how a new wave of business activity would unfold.<\/p>\n

Today, we are seeing a similar shift under way around artificial intelligence. As senior writer Harry McCracken reports in what we’re calling “The Great AI War of 2018,” the investment in and motivation behind AI is setting in motion yet another wave of change-one that spans all industries and again features Amazon, Apple, Facebook, and Google (now Alphabet).<\/p>\n

With AI poised to affect not only businesses but also the everyday lives of people around the world, the intersection between tech and culture has never been more intense or more significant. You can see it in Netflix’s new clashes with Disney, in how cruise behemoth Carnival is experimenting with connected devices, in the introduction of clothing with conductive thread by Levi’s, and in Target’s support for a new product line inspired by app games. When the world’s premier basketball player is looking to learn from a 6-year-old YouTuber (“Kevin Durant’s Killer Crossover”) and a high-profile fashion designer is more excited about synthetic biology than style trends (“Stella McCartney Weaves a New Way Forward”), we can’t ignore that something different is going on. …<\/p>\n

You can’t read Fast Company’s<\/em> AI story online. You have to subscribe to the magazine. It’s worth subscribing.<\/p>\n

Ethanol is deadly.\u00a0<\/strong><\/span><\/p>\n

Writes my auto expert, Ron Acher:<\/p>\n

Yes. Ethanol is bad long term for auto engines, and death for lawn mowers, gasoline generators and other two-cycle engines.<\/p>\n

Some states mandate 10% Ethanol in all gasoline (e.g. NJ), others do not.<\/p>\n

Ethanol-free gas costs around $4 a gallon, the last time I found some in PA.<\/p>\n

To find gas stations that sell real gas (i.e. no ethanol), click\u00a0www.pure-gas.org<\/a>\u00a0<\/strong><\/p>\n

Fun reading:<\/span><\/strong><\/p>\n

+ Dan Brown is a very bad writer.<\/em> Click here.<\/a>\u00a0<\/strong><\/p>\n

+ The weirdest things left on planes.<\/em> Click here.<\/a>\u00a0<\/strong><\/p>\n

+\u00a0Drone Video of Border Wall Prototypes Accidentally Shows How Worthless the Wall Would Be.\u00a0<\/em>Click here.<\/a>\u00a0<\/strong><\/p>\n

Favorite New Yorker cartoons this week<\/strong><\/span><\/p>\n

\"beanbags\"<\/a> \"90years\"<\/a> \"algebra\"<\/a><\/p>\n

\"HarryNewton\"<\/a>
\nHarry Newton, who marvels at Trump’s brilliance in disposing of all his opponents. His outrageous behavior will continue, since it’s so effective. And it resonates well with his angry base.<\/p>\n