It’s courage why wealthy investors are doing better

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