So this investing principle looks at investor behaviour. And so this is actually a graph from Platinum. So Platinum are an investment manager. This is not a recommendation. Just make sure you read the disclaimer at the start of the video. It’s not a recommendation from Platinum. But we’re using Platinum’s funds flow data to show how investor behaviour sometimes can be very counterproductive. So we’ve got a couple of principles on investor behaviour we want to go through, but examples. I’m going to start with this one because this is looking at the money going in and out of Platinum’s funds over a period of time. So this is from 2002 sort of to 2013. that covers the GFC period and the lead up to and after as well. And what these two graphs are, so this first one, this sort of orangey graph here, is a performance confidence. So it’s a mix of their one and three year performance. So basically at this point in time, their short term performance had been really strong. They’d had really good years leading up to that. And then obviously that dropped off a little bit, then it was strong, then dropped off a little bit, stronger, dropped off a bit. obviously it’s during the GFC, they had slight negative returns during that period. This blue line then looks at money going in and out of this particular fund, six months later. So they’ve been slid back and adjusted. In other words, this particular point here on the blue graph is six months after that point on the orange graph. So it’s actually up here somewhere, right? So in other words, this is the behaviour that follows this performance six months later, because it takes a while for investors to react. And what you can see is there’s a very clear correlation, at least, if not causal relationship. There’s a very strong correlation between relative short-term performance in this fund and investor behaviours six months later. The stronger the performance, the more money seems to flow in, and the weaker the performance, the more money seems to flow out. – Six months later. – Six months later. And so what that tells you is, and you can just see visually if I move that six months down the track, the timing of this is horrendous. You’ve got people moving into the fund when it’s doing– – It’s fast. – It’s on the way up and out of the fund, right? on the way down, if not the bottom. And so that investor behaviour turns out to be a very significant driver of returns and performance. And we can see this even more comprehensively in a thing called the Dalbar study. So the Dalbar study is a study done looking at US data, but again, very similar to that platinum example, but across mutual funds in the US. So it’s not tracking the performance of the fund. It’s tracking the performance of the investors in the fund. So looking at when you put money in, when you took money out, and what return you actually generated on that money while it was there. So real returns in that sense. And it looks at what return investors got on average over one year, two years, three years, up to 20 years. Okay, and it’s been running for a long time. So we can, and I’ve got a couple of examples here, we’re gonna look at 20 year data. So in other words, for the 20 years in this case, in the first case we’ll go to 2005. So from 1985 to 2004, on average over that 20 years, what happened to the markets versus the returns investors actually received? So just to give you an idea of what happened during that period of time, we had the ’87 crash, we had the recession in the 1990s, we had the bond crash in ’94, we had the Asian crisis and the collapse of long-term capital management in the late ’90s, and then we had the tech wreck year 2000. So a lot happened, right? And a few books written on all that sort of stuff. And what we know is if we look at the S&P 500, so this is the top 500 companies in the New York Stock Exchange in the US, the average annual return was 13.2%. That was a really good 20 year period. But the average investor return during that period of time was 3.7. – So 13% is in, so like if you had 100 bucks in, you get 13 bucks back every year. – Compounded, average return over that period of time. – That’s pretty good. So yeah, so if you invested in 1985, slipped into a coma and woke up 20 years later, and had just got the market return, your average annual return was 13.2%. – That’s pretty good. – All right. – Compounded as well, that’s pretty good. – Compounded, right? The average investor though, got 3.7. The difference in end capital is nearly 500%, right? So just investing in the market and waking up 20 years later, you’d have nearly five times as much money as the average investor. And all you did was nothing. Yeah. Right? Let’s look at 2011. So again, this is from 1991. So this is starting in the ’90s recession, going to 2010. So again, we’ve got ’94 bond crash, Asian crisis, long-term capital falling over, and the tech rec. But now we’ve got 9/11 and the GFC happening in that as well. So the average return in the market was actually only 9.14, so a bit less. Average investor return, 3.83. So again, do nothing, get 9%. Be the average investor, move your money in and out when you think it’s a good idea to do it, and you get 3. So not as punishing because the market return wasn’t as high, but basically the investor got the same return regardless of the market, but still 171% less. Let’s look at 2019, same thing. We got the tech rec, we got 9/11, we got the GFC. Market return lower during that period because we had a couple of big ones and we hadn’t finished coming out of the GFC during this period of time. And we’re right at the peak of the tech rec. So we’re very, this is a very, the reason I picked this one is a very low returning market, 5.63. But the average investor knows how to ride it home and got 3.8. So 3.7, 3.83, and 3.88 average 20-year return in three completely different market scenarios. – So it tells you a little bit about the average investor. – So it’s almost like the average investor’s gonna get 3.8% return, regardless of what the market delivers. – Be 80%. – Right, so again, not penalised as much ’cause the market return wasn’t as strong during that period, but again, a lot less. And the only difference between these two columns is in this case, this is the market, you do nothing. In this case, you’ve done something. And so when you hear about average investor returns, the biggest driver of average investor returns is the behaviour of the investor, not the behaviour of the market. So behaviours, we talk about your behaviours are your truth. Behaviours don’t just matter, they are the biggest determiner of your results. So you can get all your asset allocation, you’re doing investing strategy really, really right, if your investor behaviour isn’t, and again, that’s linked to, we looked at the principle of asymmetric returns, right? Is that because if you’re not, and we’ve also looked at the principle of you lose on the way up, right? So if you’re not there when the market goes up at the right time, if you’re losing money when you didn’t need to, the positive returns required to regain those is too much. And that all comes down to, this is what we see in actual practical, This is actual data of investor returns out of the US. – Wow.