Investment returns: theory and practice

Discussion in 'Psychology' started by Ash1972, Apr 25, 2011.

  1. Ash1972

    Ash1972

    The best performing stock mutual fund for the first decade of this century was Ken Heebner's CGM Focus Fund. He managed to average 18% per annum over the 10 years.

    So no doubt investors in his fund would be pretty happy, right? Wrong. The average return achieved by investors in this fund over the same time period was a shocking -11% per annum. Yes, MINUS ELEVEN percent per year, a total of 94% less than what they should have made.

    The herd behaviour of investors and how they mess things up for themselves is the #1 story in finance. Understand this and everything else is just details.
     
  2. Reminds me of that famous Warren Buffet quote:

    Be fearful when others are greedy, and be greedy when others are fearful.
     
  3. Thanks Ash.

    I used to follow Heebner's fund until the credit crisis reared its head.. Interesting statistic.. where did you get that data, I'd like to find out more if I could...
     
  4. Ash1972

    Ash1972

  5. 1) It went from 15 to 60 to 20 to 35. Quite a rocky ride. :eek:
    2) Most investors were attracted to it in the 50's. :(