9 Ways to Ensure a Better Investing Experience

9 Ways to Ensure a Better Investing Experience{4:15 minutes to read} Most people who invest are caught up in chasing past returns, but investing is actually about having a belief system.

Here are 9 tips to ensure you have a better investing experience based on science, not predictions.

  1. Embrace market pricing. The market is an effective information-processing machine. Millions of people buy and sell securities every day – $302 billion trade in world equity markets daily. The markets aggregate all known information.
  2. Don’t try to outguess the markets. Have a systematic way to invest. Most people’s emotions get in the way when it comes to investing, and they chase performance because it’s uncomfortable to buy something that’s not been doing well in the recent past.
  3. Resist chasing past performance. Some investors choose funds based on recent past returns; however, the funds that have outperformed in the recent past do not always continue as winners. Past performance alone provides little evidence of a fund’s ability to outperform in the future.
  4. Let markets work for you. Financial markets reward long-term investors. People expect a positive return on the capital they provide. In the past, equity and buying markets have provided the ability for wealth to grow at a rate that has exceeded inflation. For example, $1 invested in 1927 in small cap stocks was worth $21,000 at the end of 2014.
  5. Consider the driver of returns. Research has identified equity sources of returns. These dimensions are pervasive, persistent, and robust, and can be pursued in cost-effective portfolios with us. The dimensions and returns are:
    1. Market and equity premium
    2. Company size
    3. Relative price value premium
    4. Profitability
  6. Practice market diversification. Diversification helps reduce risk without sacrificing return. But diversifying within the U.S. market is not enough. Global diversification can broaden your investment universe. The only free lunch in economics is diversification – you reduce variability, while not reducing returns.
  7. Avoid market timing. You never know which markets will outperform year-to-year. By holding a globally diversified portfolio, investors are well-positioned to capture returns wherever they occur. History shows that over longer periods of time, asset class returns are similar, so one needs exposure to the whole world.
  8. Manage your emotions. Most people’s emotions interfere with them getting what they need. Look beyond the headlines.
  9. Focus on what you can control, which is cost, and the science of markets.

Most people are not psychologically or emotionally wired to invest their own money. If you want a better investment experience, contact us today at viaiv.com.

Jeff Holland

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