Chapter 9 was about common investment mistakes and how often those in this business are the best and smartest, mostly due to the high pay and bonuses that those in this industry are accustomed to. The chapter discusses how past performance is not an indicator of how a stock will perform in the future. Small percentages of the stocks perform well more than one year in a year and an even smaller percentage perform well over the course of the 3 years. There has been some research that suggest there is a minor relationship between past and future performance but it is inconsistent and too small. There are funds that do outperform the market more than one year in a row but it is difficult to predict which funds these will be. Index funds have smaller fees than mutual funds and mutual funds that are actively managed have even higher fees and expenses. Hedge funds have grown from $240 billion in investments in 1998 to approx.
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The chapter looked at findings that we learned about previously as applied to investment decisions, poor practices of day trading and some common sense investment advice. People can also be overconfident in investing, believing they know how the market will go and failing recognize the high expenses that can add up with frequent buying and trading of stocks. Many also fail to recognize the other options out there such as index fund, which is designed to help funds be managed cheaper. Research showed that on average investors that managed their own stocks trying to have the right portfolio earned less than the ones that firms managed. Women tend to achieve better results than men, not because they pick better stocks, they aren’t significantly different. Optimism is something else that hurts investors, people tend to be overly optimistic about their investment and they maintain that optimism in recalling how something performed. We have a psychological need to have good
The chapter looked at findings that we learned about previously as applied to investment decisions, poor practices of day trading and some common sense investment advice. People can also be overconfident in investing, believing they know how the market will go and failing recognize the high expenses that can add up with frequent buying and trading of stocks. Many also fail to recognize the other options out there such as index fund, which is designed to help funds be managed cheaper. Research showed that on average investors that managed their own stocks trying to have the right portfolio earned less than the ones that firms managed. Women tend to achieve better results than men, not because they pick better stocks, they aren’t significantly different. Optimism is something else that hurts investors, people tend to be overly optimistic about their investment and they maintain that optimism in recalling how something performed. We have a psychological need to have good