WSJ Excerpt: Why You’re a Lousy Investor

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An excerpt of my book appears in today’s Wall Street Journal (front page of the Money & Investing section).  It explains, using “Back to the Future Part II,” why market timing is so futile.

What follows is an excerpt of the excerpt (is there a word for that … excerptlet maybe?).

Investors are way off in their estimate of how their portfolio has done, routinely guessing several percentage points a year too high. While that comes as a shock, they are even more surprised to be told that it is missing good times rather than suffering through selloffs that hurt them the most.

Like Biff, investors sit out on some really good days by trying to avoid bad ones. Nearly all of those happen around scary episodes such as October 1929, October 1987 and in 2008 following the collapse of Lehman Brothers. Pretend, for example, that you took your money out of the market following the choppiest episodes over the last 20 years and wound up missing the epic rebounds that made up the 40 best days. You actually would lose money. A couple of days a year on average produce all of the market’s return.

Read the whole thing or, even better, buy the book. It just went on sale.

 

 

 

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