When asked to choose between stocks, bonds and commodities, which investment do you think has gone up every year of the past three, and saw a double-digit average return over that period?1 Given the uncertainty we’ve faced during that time, you might be surprised at the answer. To find out, watch the video below.
You might also be surprised to find out how preconceived notions and irrational behaviors often cause us to make investment decisions that can undermine our goals. The field of behavioral economics, which applies scientific research to human behavior, turns many common assumptions we have about stock market behavior and investing on their head. Recognizing these irrational behaviors and biases can be a first step toward developing a more rational investment approach.
In the coming weeks, we’ll be exploring these themes in a series of posts on Beyond Bulls & Bears. The video below offers some food for thought on how various asset classes have performed vs. investor perceptions, and why you might want to think differently about how to invest for your future.
For more insights on behavioral economics and equity investing, please go to our new 2020 Vision: Time to Take Stock website.
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What are the Risks?
All investments involve risks, including possible loss of principal.
1. Based on average annual returns for the three year period ended June 30, 2012. Commodities are represented by the Dow Jones UBS Commodity Index. Bonds are represented by the Barclays U.S. Aggregate Index. .Stocks are represented by the S&P 500 Index. Source: © 2012 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.