October 30, 2012

Today in class we learned about the market in the past 20 years. We saw a graph which showed the average percent returned for the markets and the individual investors. The stock market made 9.14% while individual investors in the stock market made 3.83%. The bond market made 6.89% while individual investors in the bond market made 1.81%. This makes it seem like the individual investors aren't really reaching their full potential. Why is there such a great difference between how much the market made and how individual investors made. There are two reasons why they aren't exactly investing their money very well. One reason is the fees they have to pay when their money into things like actively managed funds. The second reason is human behavior; people tend to allow their emotions to make  decisions for them so sometimes, for example, they will buy stocks when they are more expensive instead of buying them when they are cheap. By doing that they make it difficult to make a good profit out of it.

I thought to my father briefly about this and he wasn't really that surprised that there was such a big gap, but that was because he had already known about it. He thought it was really sad, however, that the average person doesn't really get very much money because of bad investments. He says he would be one of those people because he is absolutely horrible at dealing with finances. He also figures that if they invest wisely, they can definitely earn more. But since he's bad with finances, instead of him worrying about them, he makes my mother take care of them.

During the October break I spent a lot of money because I hung out with my friends quite a bit. So, I ended up spending like over $100.