Investing and Elections
The election is over. Obama won, Romney lost. What did we learn from the runup to the election? Most of the
political pundits were wrong, is some degree. Oversampling, under-sampling, turnout, momentum… pundits trying
to use data to make a call on the next President. Garbage in, garbage out. Turns out, the majority of
predictors were wrong.
When it comes to investing, investors try to make money in the market. What are they using for ‘tips?’
Stock-picking analysis, economic barometers, momentum, 5-star funds, sector rotation…
The problem is investors use all the wrong data (like political pundits) to make their decisions. Need proof?
Standard and Poors calculated the number of actively managed funds outperformed by benchmarks over
various time periods. Here’s one significant finding: For the one-year period ending June 30, 2012,
89.84 percent of all domestic equity funds were outperformed by their benchmark. Yet, even with these
daunting odds, the majority of investors continue to purchase actively managed funds.
Get it? Investors investing in almost 90% of the funds that don’t beat the index! Your light bulb should be
going on right now.
As with elections, the pundits in the financial media (and most brokers and advisers) ignore or
spin the data. The moral is clear: You need to ignore the pundits and focus on the data.
I coach investors using the ‘real’ data, so you, the ‘real’ investor, get the returns you invest for.
Savvy investors pay attention to peer reviewed data and ignoring the pundits. Market returns are yours
for the asking.
Here’s to your wealth!
The securities industry is hoping you won’t ask.