Too Clever By Half

Why Good Investing Is Easier than Bad Investing

John Maxfield

1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 20130

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+ 543%

+ 178%

S&P 500

Average Investor

S&P 500 vs. Average Investor: 1993-2013Index: 1993=100

Source: DALBAR

S&P 500 Average Investor

9.22%

5.02%

Source: DALBAR

Average Annualized Return: 1993-2013

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2000Money Flows vs. the S&P 500 Since

1997

Source: YCharts.com, Investment Company Institute

2002: ↓ $29 billion

2006-07: ↑ $221 billion

2008-11: ↓ $385 billion

2013: ↑ $160 billion

2000: ↑ $315 billion

“Success in investing doesn’t correlate with I.Q. Once you are above the level of 25, once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”

- Warren Buffett

Of all the verticals, financial media is the only one where there's supposed to be some sort of responsibility that comes along with it. . . . When you think about fashion, art, sports, Hollywood gossip, in all of these different huge categories of news . . . there is no responsibility. People don't watch ESPN and then think they're supposed to go out and play tackle football with 300-pound guys. But for some reason, when they watch financial or business news, they then take the next step in a lot of cases and say "I'm supposed to act on this now.“

- Joshua Brown, Clash of the Financial Pundits

Commis-sions &

Transac-tions Fees

42%Other 58%

How the Financial Industry Makes Money

Active Traders Average Investor S&P 500

11.4%

16.4%17.9%

Trading Is Hazardous to Your WealthAnnual returns from 1991-1996

Source: Barber & Odean, Trading Is Hazardous to Your Wealth

“If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring.”

- George Soros

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Per-Share Book Value of Berkshire Hathaway

S&P 500 with Dividends Included

Source: Berkshire Hathaway

Warren Buffett vs. the S&P 500Index of Berkshire Hathaway's per-share book value vs. the S&P 500 (with dividends included); 1964=100

Average Hedge FundSince 2005

31%S&P 500

Since 2005

60%Source: Bloomberg, Ycharts.com

“Your Last Remaining Edge on Wall Street”

- Morgan Housel

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Average Holding Period for Stocks (Months)

Source: NYSE Factbook

12.5 Years

1 Year

3 Concluding Thoughts…

Buffett’s 2 Rules of Investing

Say NO to trading

Use time to your advantage

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