A research paper about how financial professors do their investing with stocks and exchange traded funds (ETFs) showed some enlightening things.
The paper, conducted by professors at Florida State University and Central Michigan University, revealed that when it comes to putting words into action, most professors practice what they preach.
Mary Dalrymple for the Motley Fool rounded up the findings. Two-thirds don’t try to beat the market and instead invest in index funds. They tend to stay away from individual stock-picking, and nearly 15% had never purchased a single stock.
But the other third did nearly the opposite of what they taught their students. Instead of using models and theories about risk and asset pricing, they did what amounted to chasing performance. Shame, shame.
Dalrymple finds the survey to be a good example of something that can just be human nature: ignoring the fundamentals that we know are true.
It just goes to show – even the oldest cliche can contain a grain of truth: don’t chase performance. That’s sound advice.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.