There seems to be an inverse relationship between an investor’s purported level of sophistication and their returns in recent years. At least, that’s what one might assume when comparing the historical aggregate return of US households with that of the hedge funds community.
Using data from the Federal Reserve, Gaurav Chakravorty and Amit Sinha explained in a column for MarketWatch how since 2003, the average American household has earned a greater return on investment than the average hedge fund. What accounts for this achievement gap? The two authors explain that households typically don’t invest their wealth like ‘day traders’ or ‘return chasers.’
They operate more like ‘skilled portfolio managers’ who ‘appear to be rational actors.’ In other words, they rarely adjust their portfolios.
This post was published at Zero Hedge on Aug 5, 2017.