Rational Advisor

In an earlier post, I had highlighted a conversation with David Dreman, about two different kinds of investors “the Wealthy” and “The Rest”

Unfortunately, there are too many in “The Rest” category - let’s call them “The Masses” and too few in “The Wealthy”

If “The Masses” made the right investment decisions greater than 50% of the time, they would be in “the Wealthy” group. Unfortunately they don’t.

David’s premise was, that what “The Wealthy” do is really the opposite of what “The Masses” do. They don’t read the same things, they don’t watch the same things, and really when “The Masses” are zigging, “the wealthy” are zagging.

Now to why, I am bringin this point up, again and again

Todays news article is from the cbc (I am giving you the highlights)

Mutual fund sales plunge to $460.5M in January; industry assets sag

Investors abandoned stock and bond mutual funds in droves during January, pulling a net $4.35 billion out of long-term funds during a stomach-churning month on financial markets.

This was offset by $4.81 billion in net sales of money market funds, leaving the industry with net sales for the month of $460.5 million - down from $2.9 billion in December and $4 billion in January of last year.

Investors pulled $3.1 billion out of equity funds in January.

Balanced funds, regarded as a steady combination of equity and fixed-income holdings, endured net redemptions of more than $1.1 billion in January, while redemptions from bond funds exceeded sales by $218 million.

http://www.cbc.ca/cp/Money/080215/J021502AU.html

So, “The Masses” have taken their money out of balanced funds, and equity funds.

Who would you rather follow “The Masses” or their counterparts. “The Wealthy”. If the “The Masses” are selling, there has to be a buyer, and typically that buyer is “The Wealthy”

Remain Rational - don’t let your emotions make you part of “The Masses”

Rational

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