The psychology of investing leads people to invariably jump in and out of investments at the wrong time. Been there, done that.
Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.
The recipe for loss, or at least middling returns, is to sell on type of investment on the downturn and buy another when it’s ascending. Put simply, we sell low and buy high. These people are buying into bonds as they are riding high.
Take free advice for what it’s worth, but the Occam’s razor portfolio would likely beat any managed mutual fund over the long run. It will 3 ETFs and 10 minutes of work a year.
Put 40% of your money into BND which is a total market bond ETF. Put 30% of your investment money into VTI which covers the entire US market from low to high. And put the remainder into VEU which is an index that invests in the whole world excluding the US. Choose a brokerage with cheap commissions which will re-invest dividends for you. Rebalance back to the 40-30-30 split once a year and Bob’s your uncle.
When it comes to investing, I’ve done all the dumb things.