Investors: the Biggest Threat to Their Own Returns

Lack of choice is no longer the obstacle to investment success; lack of discipline is

Morningstar 18 August, 2016 | 1:15PM

There’s never been a better time to be an individual investor in terms of choice, cost, and safeguards. The range of investment options offered to investors has never been so great and the pricing has never been so transparent or so low. The toolkit available to even the humblest of investors dwarfs that that the most elite professionals had 20 years ago.

In a very real sense, the playing field has been levelled. Improved access has not been coupled with increased enthusiasm, however. While the tools are available, the benefits of using them strike many as being greatly diminished compared to past decades. Bonds offer anaemic yields and seemingly little upside. Equities seem reasonably valued with few absolute bargains. The only generally agreed to be cheap area is emerging markets, and investors who have been dipping their toe there have been repeatedly punished in recent years as this statistically inexpensive area has fallen further.

Damaging Memories of the Global Recession

Compounding the problem are the lingering aftershocks of the financial crisis. Despite magnificent gains in developed market stocks, the trauma of steep losses during the crisis has scarred many potential investors, who, having missed the rebound, now feel little appetite to re-enter the fray.

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