Fundamental to the CARE Investment Philosophy
is what is known as the Dalbar Study. The original Dalbar study was conducted between 1980 to 2000 in the USA on the top 500 US listed companies. The study found that the average return over that 20 year time period for the 500 companies was a 12% return. Do you know what the return was for investors over the same period? It was around 4% over the same 20 year period! That's a poor average investor return.
The number one reason for the 8% difference was bad investor behavior. See the Dalbar emotional rollercoaster picture below.The CARE philosophy
believes that 50% of your returns are made up by your investment behavior. 45% of your return is to do with asset allocation and the remaining 5% is timing and selection. The traditional investor would contest this and say the investor return equation is 90% asset allocation and 10% timing and selection and has nothing to do with investor behavior. However, based upon the DALBAR study we do know that 50% of returns are based on investor behavior, which has a critical impact on your returns. The Dalbar study
found that the average holding period by investors who said they were investing for the long term was just over 3 years! Those investors made bad short term decisions based upon events happening in the world at the time. That's why the CARE investment philosophy was designed – to stop investors from blowing up money, to prevent bad investment decisions being made in down markets and to stop the dangerous Dalbar cycle that destroys the wealth our clients have worked so hard to create.
Are you interested in an excellent investment philosophy that protects your investment future? Ask your GPS Wealth Adviser for more information on CARE Investment Philosophy