When do most investors feel the need to buy or sell stocks? If you said they do so at the periods of highest market volatility, you're pretty close. A professor of finance at NYU recently got hold of nearly 20 years' worth of communications from an investment firm named Gerstein Fisher, and was able to track the requests of the firm's clientele. The result: Individual investors most often want to sell just after a time of great market volatility.
The research showed, unfortunately, that such a strategy led investors to either buy at a market top, or sell when the market was at its low. These overly aggressive orders end up costing investors about four percentage points a year over a more rational trading strategy. "Buy low, sell high" is a truism that every investor respects - until the market starts soaring or tanking, and the investor starts panicking.
The study also revealed one of the true values of a wealth manager. As much as choosing which stocks or funds to buy, sticking to a reasonable, well-planned strategy is one of the hallmarks of meeting your long-term financial goals. Careful guidance from an experienced wealth manager truly does help save you from your own mistakes.
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