High returns while taking minimal risk is a pipe dream; if asset growth is your priority, taking risk is crucial.
Likewise, three quarters of investors told Natixis they only own investments they understand well, which makes sense until you hear that just one-quarter of all investors surveyed felt their overall investment knowledge was particularly strong.
If they’re not relying on investment knowledge, investors are playing the market the way most people bet at the track or in the casino, by playing hunches. Nearly 80 percent of investors surveyed by Natixis said they simply follow their gut instinct.
That’s not financial planning.
Investing is about trade-offs; you simply can’t have it all.
So if you need to make 10 percent above inflation to meet your future needs, but you are only willing to assume minimal investment risk in an attempt to generate those gains, something has got to give.
That give and take — the push and pull of emotions — is inevitable, but a study released today by Natixis Global Asset Management suggests that investors aren’t particularly accepting of those compromises, and instead are living in a world of unrealistic expectations and conflicting sentiments, leaving them hoping impractically that events will work out their way because they see no other route to success.
Meanwhile, their behaviors reduce the chance that they get the best possible outcome, often because their actions are based on “gut instinct,” which is a good way to develop trust in the moves you are making, but not necessarily the best way to decide which financial steps to take.
If you are a mutual fund investor trying to figure out how to reach your goals, examining the Natixis study and seeing how the investment public makes moves that feel benign but wind up dangerous could be a wake-up call. If the average investor’s behavior is incongruous, but you see the same characteristics in yourself, it’s time for a change.
Let’s dig into the survey.