Financial DIY mistakes being repeated

I blogged before about the growing use of financial diy what with disillusionment with some poorly skilled financial advisers picking funds from mid air coupled with greater information being available to make investment decisions. Since the start of the financial crisis, both the use of the internet and financial diy – that’s where the man on the street invests on his own accord without incurring the cost of advice – has boomed. But how are those novices doing? Are they making the same mistakes that Dalbar’s research identified as covered in a recent blog?

Research by Dalbar (July 2008) found the average annual stock market return between 1988 and 2007 was 11.6% whilst the average stock market investor return was just 4.5% because on average, money tends to rush into the market when it does well and leaves when doing badly.

So what’s been happening? Well, true to form the Financial Times reported on Saturday 13th August 2011 that as the markets hit lows, financial diy mistakes were being repeated on diy platforms - ”while 73% of Hargreaves Lansdown sharedealing clients bought this week, 55% of fund investors were sellers“.

It’s the classic human behaviour which occurs when left to our own devices.