Investor Behavior
Greatmark Investment Partners serves a vital role in helping clients manage the emotions of
investing. Markets are, in large part, driven in the short-run by the emotions of fear and
greed. This can lead to "over trading" of a portfolio trying to capture short-term swings. We
believe trigger happy investors are more prone to shoot themselves in the foot than they can
accurately time the emotional whims of the market.
Consider that in a 10-year period from 1985-1995, the average stock mutual fund posted a
yearly return of 12.3% yet the average investor in a stock mutual fund earned only 6.3%.
Investors realized about 1/2 the actual return due to their tendency to trade in and out of
mutual funds at the worst possible time as they chased performance.
Investor behavior also leads to over-diversification. The average mutual fund has 86%
annual turnover, 132 holdings and no position larger than 5% of the portfolio. Nearly 100%
turnover doesn't indicate to us a patient, long-term approach. Owning 132 stocks doesn't
indicate patience and discipline in trying to buy stocks on sale. And limiting the portfolio to no
more than 5% in any stock is a bit like a high school football coach playing all 100 players
every game so that he can keep his best player on the bench during most of the game.
Greatmark runs a concentrated portfolio investing our client's money into a concise portfolio of
businesses we can know and understand. We try to buy great businesses during the rare
times they go on sale rather than being frequent traders of stocks. There are many ways to
make money investing, we happen to prefer the patient, long-term approach.
investing. Markets are, in large part, driven in the short-run by the emotions of fear and
greed. This can lead to "over trading" of a portfolio trying to capture short-term swings. We
believe trigger happy investors are more prone to shoot themselves in the foot than they can
accurately time the emotional whims of the market.
Consider that in a 10-year period from 1985-1995, the average stock mutual fund posted a
yearly return of 12.3% yet the average investor in a stock mutual fund earned only 6.3%.
Investors realized about 1/2 the actual return due to their tendency to trade in and out of
mutual funds at the worst possible time as they chased performance.
Investor behavior also leads to over-diversification. The average mutual fund has 86%
annual turnover, 132 holdings and no position larger than 5% of the portfolio. Nearly 100%
turnover doesn't indicate to us a patient, long-term approach. Owning 132 stocks doesn't
indicate patience and discipline in trying to buy stocks on sale. And limiting the portfolio to no
more than 5% in any stock is a bit like a high school football coach playing all 100 players
every game so that he can keep his best player on the bench during most of the game.
Greatmark runs a concentrated portfolio investing our client's money into a concise portfolio of
businesses we can know and understand. We try to buy great businesses during the rare
times they go on sale rather than being frequent traders of stocks. There are many ways to
make money investing, we happen to prefer the patient, long-term approach.
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