5 tips to make you a better investor


By Sam Instone - July 26, 2017

How many times have you started a diet and then fallen off the wagon?

Instead, how about a change of behaviour?

Evidence shows if you eat out with friends, you consume nearly twice as much as you normally would.

Behaviour change can also have a positive impact on your investing success.

Here are 5 changes that’ll make you a better investor.

1. Know you’re average

A survey of 600 professional fund managers revealed that three quarters thought they were better than average.

Similarly, 90% of people believe that they’re better than average drivers.

The findings of a study of investors found that participants consistently overestimated both future and past performance.

Overconfidence leads to overestimation of knowledge and skills, underestimation of risks, increased perception of an ability to control events…

And it will decimate your returns.

2. Accept you have no sixth sense

You cannot predict the market, but the evidence suggests you might think you can.

Nobel prize winning economist, Robert Shiller, surveyed Japanese investors before and after the 1989 market crash. 

Only 14% of those asked prior to the crash said the market was overvalued.

32% of those asked after the crash said they’d known the market was overvalued!

Hindsight bias as an investor is dangerous.

Don’t let it fool you into thinking you can predict the market.

3. Brush up your basic maths

In our experience, average expat investor fees are 4.91%.

Which may not sound like a lot.

But investment costs eat away at your savings.

If you invest $100,000 for 25 years,

Assume growth of 6% a year,

And pay no fees, you'd end up with $429,188.

But if you pay 4.91% a year in costs, your money will only grow to $131,132.

You will have lost $298,056 in costs.

What’s worse, there are many expat investors who pay far more than the 4.91% average.

We recently helped an investor who was paying over 12% in fees!

How much are you paying?

How much is that eating into your future returns?

4. Be more sceptical

In her book, Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, author Helaine Olen cites a study by the University of California that found every time a stock was mentioned on CNBC, its price went up – whether the news was good or bad.

As an investor, ignore the media and market noise. Ignore stock pickers and investment gurus.

As former Business Insider personal finance editor Mandi Woodruff says of her own industry:

Treat talking market gurus like the ad-selling entertainers they are meant to be, and take their advice with a huge dose of salt."

5. Stop checking your portfolio

A study by the University of California discovered:

"A strong inverse link between daily stock returns and hospital admissions, particularly for psychological conditions such as anxiety, panic disorder, or major depression."

In other words, obsessing over your portfolio isn’t good for you.

Assuming you’re invested in a well-diversified portfolio of low-cost index funds, you shouldn’t be checking your portfolio more than once a year.

As Warren Buffett says:

"Until you can manage your emotions, don't expect to manage money."

If you’re ever in doubt about existing investments, you don’t understand the charges you’re paying, the product you’ve purchased, or the way your portfolio has been put together – please get in touch. 

We fit broken portfolios - Sam (LIGHT) smile