what Professional Investors are doing wrong and what you can learn from this??
1- Index hugging:
Most Fund Managers just copy an index.
✅Takeaway for you: If you want to outperform, you have to do something different. If you want to hug an index, just buy a low-cost index fund.
2- Short-term mindset:
Professional Investors focus on quarterly results.
✅ Takeaway for you: Think in quarter decades instead of quarters and always stay within your circle of competence.
3- Sound interesting > be interesting:
When I worked in the industry myself, I often had the feeling that it was way more important to sound interesting than to be interesting.
✅ Takeaway for you: The best investors are willing to look like a fool from time to time. Focus on being interesting instead of to sound interesting.
4- Trading too much:
At the company I worked for, there was a Fund Manager who traded equities for roughly $400 million per year. The size of his fund? $100 million. This means he bought and sold all position within his fund 4 times per year or once every 3 months.
✅ Takeaway for you: Don’t trade too much. Fees and expenses harm your investment results.
5- Focusing on the news:
For Fund Managers, it’s way better for their reputation to fail conventionally than to succeed unconventionally. That’s why most Professional Investors suffer from herd behaviour.
✅ Takeaway for you: Think contrarian. When the media is talking about market crashes, it’s usually a great time to invest and the other way around.
6- Looking at macroeconomics:
A lot of Professional Investors make investment decisions based on macroeconomics.They switch from value to growth, increase and decrease their exposure to foreign currencies, … based on certain economic predictions.
✅ Takeaway for you: Be a bottom-up stock picker. Focus on the evolution of the intrinsic value of the companies you own.
7- Only investing in large caps:
Due to their size, Professional Investors can almost solely invest in large caps. The law of large numbers is the main reason why Berkshire Hathaway didn’t outperform over the past years.
✅ Takeaway for you: The smaller the stock, the less efficient the market. That’s why there are huge opportunities in small cap stocks for investors like you.
8- Lack of accountability:
A study of Morningstar found that two thirds (!) of all Fund Managers didn’t invest a single dollar in their own fund.
✅ Takeaway for you: Skin in the game matters. Focus on great owner-operator stocks or family companies.
9- Complex investment strategies:
Using complex strategies often sounds intelligent, but it’s seldomly a good idea.
✅ Takeaway for you: Use common sense and try to make things as simple as possible, but not simpler.
– “It is better to be roughly right than precisely wrong.” – John Maynard Keynes.
10- Trying to time the market:
A lot of (professional) investors try to time the market.Know that trying to time the market is a fools game.
There are only 2 kinds of people who can successfully do it:
a- Cheaters.
b- Liars.
✅ Takeaway for you: Time in the market beats timing the market. Invest periodically and don’t worry too much about stock market volatility.
