Pursuing A Better Investment Experience
This article from Dimensional Fund Advisors (DFA) offers 10 quick tips for earning higher returns on investments. Rather than promoting snap decision-making or marketing-guessing strategies like market-timing, the article encourages investors to embrace measured, data-driven strategies to earn greater returns over the long-term.
Tips include strategies that investors should embrace and those they should avoid.
Don't engage in market guessing.
The poor success rate of these strategies is evident in the low percentages of equity mutual funds (22 percent) and fixed-income funds (10 percent) that have performed above market benchmarks over the last 20 years.
Don't focus on past performance.
Only 21 percent of the top equity funds and 29 percent of the top fixed-income funds remained in the top quartile of returns over 5 years. Past performance does not guarantee future success.
Don't engage in market timing
Predicting which markets will perform best and when is often a losing proposition. Diversification across the globe is a smarter strategy.
Don't invest based on headlines.
Investment headlines often stir up anxiety or overconfidence. Instead of following the latest news snippets, take a longer-term perspective from reliable and seasoned sources.
Don't invest emotionally.
As markets move up and down, investor emotions can run high. By avoiding snap decisions based on these emotions, investors can avoid seeing their investment success change as rapidly as the day-to-day markets.
Do follow market pricing.
Market pricing is reliable pricing, based on a daily average of $443.4 billion in average daily trades. Investors should trust it.
Do give markets time to work.
Since 1926, markets have consistently delivered strong returns that exceeded inflation rates to long-term investors.
Do base investments on proven drivers of returns.
Investors who use well-researched and historically proven drivers of returns often enjoy higher-than-average returns on their capital.
Do embrace global diversification.
Diversifying across the globe allows investors to benefit whenever and wherever markets thrive, without requiring reliance on less successful strategies like market timing.
Do focus on what you can control.
Investors are more likely to see strong returns on their investments when they use the services of a financial investor to make changes that they can control. Examples of such changes include things such as global diversification, manages expenses, and a tailored investment plan.
At Blue Water, we like to say, you can’t control the markets, but you can control your ACTIONs. ACTION is an acronym for Asset Allocation, Costs, Taxes, Inflows, Outflows and Nerves. This serves as the foundation of our investment philosophy.