It’s courage why wealthy in­vestors are do­ing bet­ter

The Star Early Edition - - OPINION & ANALYSIS -

TH­ESE days, the me­dia and the politi­cians seem to be fo­cused on in­come in­equal­ity and the ever-ex­pand­ing wealth gap be­tween the wealth­i­est of in­di­vid­u­als and ev­ery­one else.

In­deed, the rich are get­ting richer, but it’s not nec­es­sar­ily due to the wide dis­par­ity in in­comes. To a large ex­tent, it’s due to the fact that the wealthy are bet­ter in­vestors than ev­ery­body else.

It’s tempt­ing to dis­miss that re­al­ity with the no­tion that it takes money to make money, so the aver­age Joe can never in­vest like the wealthy. Wealthy in­vestors tend to ad­here to some very sound in­vest­ment prin­ci­ples that any­one can fol­low. It does help to be able to in­vest with mil­lions of dol­lars, but the same prin­ci­ples can ap­ply to a small re­tire­ment ac­count.

In mu­tual fund in­flows and out­flows you can see clearly that aver­age in­vestors tend to flee from volatil­ity and risk. Ac­cord­ing to a study by SigFig con­ducted after the Au­gust 2015 mar­ket correction, low-net-worth in­vestors were more likely to panic and sell for losses than the wealth­i­est in­vestors.

Wealthy in­vestors em­brace volatil­ity and risk know­ing that, with­out it, there could be no re­turns. Their re­ac­tion is typ­i­cally to stay the course or even add to their po­si­tions.The big­gest mis­take the aver­age Joe makes when in­vest­ing his money is he al­lows his emo­tions to guide his de­ci­sions. – In­vesto­pe­dia

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