In his recent interview on the The Long Term Investor Podcast, behavioral finance expert Dr Daniel Crosby discusses the one thing that most investors misunderstand about investing. Here’s an excerpt from the interview:
Crosby: I think the biggest thing that I would say is that they confuse externalities and internalities if we will. So when most people are looking for the drivers of of investment returns they’re going to look at things like what’s happening in Ukraine, what’s the Fed going to do, what’s the economy going to do, and they’re going to ignore all of the things that are in their control.
They’re going to focus on all the things that are outside of their control. They’re going to focus on all the things that
are candidly unforecastable. They’re going to as a result feel very helpless, and they’re leaving aside their true power.
Which is, that in every generation and in every long-term time frame we can look at the best predictor of investment outcomes, the best predictor of financial outcomes is you, is your adherence to a couple of very basic unsexy principles like keeping your fees in order, making sure you’re contributing every couple of weeks, staying the course, remaining long term, and controlling the controllable.
So whenever people learn that I work in the industry they ask me to try and forecast these things that are
coming around the bend, which of course I have no idea, and then they ignore the things that are in their power.
So I think that’s the thing they most get wrong.
You can watch the entire discussion here:
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