Reshaping the Investor Psyche, by Brian Nelson, CFA
I remember Barack Obama’s “Yes, we can” mantra in his 2008 presidential election run. He made people feel good about themselves; he made people feel like they were more than just a statistic; he made people believe that change could happen. He made us believe we could make a difference.
We find ourselves at a similar crossroads in investing history. During the past several decades as mutual funds proliferated and the thoughts of yester-year thinkers prevailed, the investment community adopted downright absurd notions that served the needs of financial institutions instead of investors. Buy-and-hold became an investing style. Timing the market became widely accepted as not viable. Technical and momentum analysis became voodoo. The use of a backward-looking star rating became a way to judge a mutual fund. Things, for the lack of a better phrase, got way out of whack.
Today, the investor psyche is being reshaped.
1) Investors now know that asset managers love buy-and-hold investors because financial institutions continue to reap fees on their investments without fear of asset flight. They now understand why most of the widely-disseminated research out there is geared toward spreading the word about a buy-and-hold strategy. Today, investors no longer ponder why asset managers want them to accept (without question) the strategy of buy and hold…forever. Investors are wising up to the true intentions of financial institutions.
2) Investors are learning that timing the market is not only possible, it is inevitable–in fact, it is what every investor from Warren Buffett to David Einhorn to Carl Icahn is doing. When Mr. Buffett, for example, buys Burlington Northern or Heinz, he has waited for…
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INSIDE THIS ISSUE
1 Reshaping the Investor Psyche
3 Margins Will Drive Apple’s iPhone 5S and 5C Outcome (ticker: AAPL)
5 Is the New PayPal App a Game-Changer for eBay? (ticker: EBAY)
6 Pay TV Is Getting Friendly with Netflix (tickers: NFLX, LBTYA)
7 Are You Ready for Some Football? Google Is (tickers: GOOG, DTV)
8 Our Best Ideas Portfolio (see article for tickers)
10 Lululemon’s Growth Slows in the Second Quarter (ticker: LULU)
12 Air Quality Standards Take Aim at Coal (various tickers)
14 LinkedIn Acknowledges Its Stock Is Overpriced (ticker: LNKD)
15 The Price-to-Earnings Ratio Is a Formula (P/E) and So Is Einstein’s Mass-Energy Equivalence (E=MC squared); We Hope Investors Understand That There Is a Lot of Thought Behind Both
20 Is Innovation Back at McDonald’s? (ticker: MCD)
21 Ideas for Your Radar
23 Featured Reports: JBL, JOUT, MSFT
26 Our Stock-Selection Methodology