The Morningstar Investment Conference is one of the best events of the year for fund investors. But few individual investors actually go; the audience is mostly financial advisers and money management pros, experts who in many cases are worried more about the latest trend than about the basics that make for investment success.
An average investor who came here for the recent Morningstar event and listened carefully would have come away with five big lessons that seemed to come up in session after session:
1. Beware the attraction of short-term bets when looking for long-term outcomes
There have been countless studies of fund investor behavior showing that typical consumers don't do as well as the funds they buy. The discrepancy is caused mostly by losing confidence in a fund and jumping around, constantly trying to make headway with whatever is hot today.
Michael Mauboussin, chief investment strategist for Legg Mason, compared it to grocery checkout lines or changing lanes in the highway, always searching for what appears to be the fastest route to your destination.
"Very rarely does changing lanes get you there significantly faster," Mauboussin said during his keynote address, "but there are risks involved in making the change and you can wind up further behind -- or worse -- if you make the change at the wrong times."
2. When it comes to information, 'availability bias' is a problem
Morningstar is in the investment-research business and has made its name helping investors see through the skin of securities, first mutual funds and then stocks and exchange-traded funds. Where old-time investors had to rely a lot more on blind faith, today's investors have tools -- like Morningstar ratings, regular performance updates and much more -- that they depend on.
Read the complete article
An average investor who came here for the recent Morningstar event and listened carefully would have come away with five big lessons that seemed to come up in session after session:
1. Beware the attraction of short-term bets when looking for long-term outcomes
There have been countless studies of fund investor behavior showing that typical consumers don't do as well as the funds they buy. The discrepancy is caused mostly by losing confidence in a fund and jumping around, constantly trying to make headway with whatever is hot today.
Michael Mauboussin, chief investment strategist for Legg Mason, compared it to grocery checkout lines or changing lanes in the highway, always searching for what appears to be the fastest route to your destination.
"Very rarely does changing lanes get you there significantly faster," Mauboussin said during his keynote address, "but there are risks involved in making the change and you can wind up further behind -- or worse -- if you make the change at the wrong times."
2. When it comes to information, 'availability bias' is a problem
Morningstar is in the investment-research business and has made its name helping investors see through the skin of securities, first mutual funds and then stocks and exchange-traded funds. Where old-time investors had to rely a lot more on blind faith, today's investors have tools -- like Morningstar ratings, regular performance updates and much more -- that they depend on.
Read the complete article
