On the road to returns, investors sometimes get in their own way. Yet investing can be pretty simple. Which investing mistakes can prove especially painful, and why quirion's digital asset management makes them easy to avoid.
Investing mistake 1: Accepting high costs
This mistake sounds especially obvious—and yet it's still made all the time: high fees drag down your returns. And costs are actually the only return factor that investors have entirely under their own control. A front-end load here, a custody fee there, an annual management fee or special exchange-trading costs: the details often aren't apparent at first glance, but they quickly add up. At quirion, the costs are clear right away and don't hide behind asterisked footnotes. For 0.48% p.a., you get to take part in genuine, digital asset management based on low-cost ETFs.
Investing mistake 2: Searching for the „right“ individual stocks
Which stock has the greatest return potential? Which stocks do other investors favor? Asking questions like these quickly gets you into trouble. The honest answer to the first question: no one knows, because the future is simply unknown. And because other investors don't know it either, a healthy dose of skepticism is warranted toward supposed „hot stock tips“ or rankings along the lines of „The most popular stocks in October.“ They suggest taking matters into your own hands. That quickly leads to an illusion of control. Picking the „right“ stocks: this works only very rarely and is really a matter of luck. You may indeed manage to catch a particularly good stock now and then. But you can't do it systematically. Trying anyway tempts many investors to attempt it again and again and to trade too often—a mistake much discussed in financial-market research. And it's not only costly, it's also fairly risky. Anyone who wants to capture market returns systematically has to take a broader approach: quirion's portfolios give investors a stake in the performance of around 10,000 companies in total.
Investing mistake 3: Too much patriotism
„Behavioral finance“ studies behavioral patterns in investing scientifically, and in doing so keeps uncovering cognitive distortions („biases“). One such behavioral pattern that can be observed worldwide is the „home bias“: Australian investors think the best opportunities are found „down under.“ Canadian investors are sure you're better off in Canadian stocks. And Germans, in turn, believe you should invest in the domestic market. People feel comfortable and safe at home, in investing too. The domestic companies and brands are more familiar to you—which, however, says nothing about their return prospects. quirion's global portfolios give investors a stake in the performance of securities from over 70 countries. That way, you share in return opportunities internationally, not just nationally.
Investing mistake 4: Wanting to find the „right“ moment
One of the questions investors ask most often is about the right moment to get in and out, so-called „market timing.“ The commercial logic seems obvious: buy cheap, sell dear. The problem: a stock can rise for much longer than expected beforehand. And fall much further. There is no fixed point at which a security is cheap or „too expensive“ to earn a return on it. In any case, capital-market research shows again and again that price movements on the stock market cannot be predicted. Analyses of the performance of actively managed funds provide further evidence of this, since they only very rarely beat their benchmark index—especially over the long term. quirion's investment strategy therefore remains forecast-free. It deliberately refrains from any attempt to find the „right“ timing. The portfolios are set up so that they capture market returns at all times.
Investing mistake 5: Leaving returns on the table
Why rely on a digital asset manager rather than simply buying an ETF on a large, international benchmark index yourself? First of all: there are many ETFs on such indices. And among them there are sometimes surprisingly large differences in cost and quality. What's more, by reaching for individual ETFs you leave a lot of return sources untapped. Every index, and every ETF based on it, has its blind spots. Sometimes no small caps are included, sometimes certain sectors or regions are left out. To bring „the whole world“ into your portfolio, quirion's investment strategists have identified the decisive return factors and represent them via special ETFs within the portfolios. Capital-market research confirms it: in terms of the ratio of expected return to expected risk, a global portfolio weighted by market capitalization is superior to any other investment.
More on quirion's investment strategy can be found here.
