For many of us, investment management is inconvenient but necessary. We have money invested in the stock market and are counting on decent returns to meet our financial goals especially for retirement. We are what I define as the ‘average investor’. We’re not finance majors and we’re not spending our hours in the day trading stocks. The following are common traits of the average investor:
- The average investor is relying on the stock market to help with retirement because he/she knows that saving money under a mattress isn’t enough to meet future needs.
- The average investor doesn’t have time or inclination to research thousands of investment options.
- The average investor uses simplistic devices like Morningstar ratings to make investment decisions.
- The average investor would prefer to not pay financial advisers to manage their portfolio because of high fees.
- At some point in time, the average investor has followed a stock tip from TV, a magazine or friend or relative and lost money.
- The average investor does not make the advertised returns of a mutual fund.
- The average investor has either a net loss or marginal gain in the stock market (compared to those on Wall Street).
- The average investor prefers a ‘buy and hold’ stock strategy because he doesn’t have time to track and research the stock to determine when to sell.
- The average investor is afraid to sell when the stock is up because of the fear or pulling out too early and missing more gains.
- The average investor is afraid to sell when the stock is going down because it means acknowledging lost investment money.
The average investor is actually the group who relies on Wall Street the most. They are not yielding large bonus checks every year or have a substantial inheritance. This group needs a return that beats inflation to get to their retirement goals. Saving into a 401K at the max rate is likely not going to yield enough income. There are also concerns about Social Security benefits being reduced in the near future. It’s important for the average investor to get educated!
The Real Money Story 