Not Your Average Investor (4 of 6)

Yesterday, I explained that one of the biggest mistakes I see investors make is getting bogged down by market noise.

Today, I want to share exactly why avoiding this issue is so important to your success as an investor.

Take a look at this chart…

It shows the results of Dalbar’s 2022 “Quantitative Analysis of Investor Behavior” report. The annual report tracks the performance of the average investor.

The red bar on the left of each grouping is you. Well, hopefully not you individually. It’s the collective you. It represents the returns of the average equity fund investor over five years, 10 years, 15 years and 20 years.

The average five-year return of an equity fund investor for the period ending December 31, 2021, was 16.80%. While that may sound decent, over the same period the S&P 500 returned 19.21%.

And time is not on the average investor’s side…

In fact, the average equity fund investor underperformed the broader market by a wider margin over 10 years and wider still over 15 years.

How is that possible? In short, the average investor lacks a disciplined investing strategy.

They’re unsure of their financial goals and risk tolerance. They buy high and sell low. They allow emotions – and the latest mainstream media headlines – to determine their next course of action. And over time, those errors add up.

That’s why, today, I’d like to introduce you to the principles that form the foundation of everything we do at the Club and have been a key to our success for nearly three decades.

They’re called The Oxford Club’s Pillars of Wealth, and they guide every investment decision we make:

1. Stick to the Oxford Wealth Pyramid.Use our proven system to build the ultimate mix of long- and short-term strategies to increase your returns and dramatically lower your risk.
2. Know Your Exit Strategy. Let your winners ride and cut your losers short. Knowing exactly when to sell – having a superb “exit” strategy – is your best defense against losses. For instance, we use trailing stops in the Oxford Trading Portfolio.
3. Understand Position Sizing. We have a position-sizing formula you can use to determine how much to invest in a particular stock: 4% of your equity portfolio. Combined with a trailing stop strategy, this ensures you will never risk more than a small fraction of your overall portfolio in a single position.
4. Cut Investment Expenses.Avoid paying Wall Street’s outlandish fees and always tax-manage your investments. It sounds like penny pinching, but do it wisely, and you could end up with hundreds of thousands of extra dollars in your portfolio.

If you pay attention to each of these pillars and follow our recommendations, you will maximize your upside while minimizing your downside. For a more in-depth look at the Four Pillars of Wealth, go here.

If you have any questions specific to accessing your subscription, please call our Member Services Team at 866.237.0436 or 443.353.4540.

Now that you have your investing rules set, it’s time to invest. Next I’ll outline how to start investing in The Oxford Communiqué‘s portfolios.

Good investing,

Alex