Investing Wisely
Investors consider a range of issues that may drive their performance: asset class selection, style allocation and manager and/or security selection among others. However, many investors may not realize a significant driver of their performance may be related to their own decision making about when to buy and sell, particularly in investments that may have the most upside potential. ​​

Chart for AOM​​​

  • The chart above shows the amount investors have underperformed equity funds over a decade because of poor timing, segmented by the volatility of the underlying funds. While investors only modestly underperformed less volatile funds, they dramatically underperformed more volatile funds. The takeaway is that when investors make buy and sell mistakes with their investments, they may suffer greater losses because of greater volatility.

  • One reason investors may have historically underperformed the actual asset classes, funds or securities in which they invest is bad timing decisions. Investors may buy too high and sell too low, often missing out on the upside potential of their securities. We have studied this premise and documented our findings in our article “Are You a Rational Investor?”

  • Fortunately, there are methods for mitigating behavioral biases and making better decisions. Alger discusses some of those approaches in our interactive educational module “How to Make Better Decisions.” ​

The views expressed are the views of Fred Alger Management, LLC as of October 2019. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, LLC. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares.

Risk Disclosure: Investing in the stock market involves certain risks, and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments.

Standard deviation is a metric that measures the dispersion of a dataset relative to its average. If the data points are further from the average, there is a higher deviation within the data set. The more spread out the data, the higher the standard deviation.​

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