50 Reasons Why Active Fund Managers Do Not Invest For Long Term

A behavioral finance expert Joe Wiggins who is an active manager, explained this in an excellent recent article.

  1. Because it is boring.
  2. Because markets are random and it’s difficult to accept.
  3. Because of short-term benchmark comparisons.
  4. Because we are remunerated based on annual performance.
  5. Because of quarterly risk and performance reviews.
  6. Because there is always something / somebody performing better.
  7. Because we watch financial news.
  8. Because we think we can time markets.
  9. Because even good long-term investment decisions can have disappointing outcomes.
  10. Because the fund we manage charges performance fees.
  11. Because short-term losses are painful.
  12. Because we forget about compounding.
  13. Because we are obsessed with what is happening right now.
  14. Because we are poor at discounting the future.
  15. Because we will be in a different job in three years’ time.
  16. Because we extrapolate recent trends.
  17. Because we check our portfolios every day.
  18. Because it is so easy to trade our portfolios.
  19. Because we think poor short-term outcomes means that something is wrong.
  20. Because we make decisions when we are emotional.
  21. Because we think we can forecast economic developments.
  22. Because we think that we know how markets will react to economic developments.
  23. Because we compare our returns to the wrong things.
  24. Because it is hard to do nothing.
  25. Because regulations require that we must be notified after our investment falls by 10%.
  26. Because it feels good to buy things that have been performing well.
  27. Because there is too much information.
  28. Because we don’t know what information matters.
  29. Because we don’t want to lose our job.
  30. Because nobody else is.
  31. Because we need to justify our existence.
  32. Because we think we are more skillful than we are.
  33. Because we work for a listed company.
  34. Because we don’t want to lose clients.
  35. Because we think one year is long-term.
  36. Because assets with high long-term return potential can be disappointing in the short term.
  37. Because we think performance consistency is a real thing.
  38. Because we don’t want to spend much of our time looking ‘wrong’.
  39. Because the latest fad is alluring.
  40. Because there is a new paradigm.
  41. Because we vividly remember that short-term call we got right.
  42. Because we can’t tell clients we haven’t been doing much.
  43. Because we think we are better than other people.
  44. Because we have to justify fees.
  45. Because we don’t want to be invested in the next bear market.
  46. Because we think short-term news is relevant to long-term returns.
  47. Because short-term investing can be exciting.
  48. Because we have to have an opinion.
  49. Because there are so many experts and they are all so convincing.
  50. Because it seems too simple.

submitted by /u/Hustle_King
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from A place for Indians to discuss and evaluate Investments http://bit.ly/2EWJahN


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