Many individual investors have real trouble with investment behavior, according to an extensive research study by market research firm DALBAR.

According to the study, even during a good year like 2013, investors performed worse than the market, earning 25.5% from their investments while the market rose 32.4%. 

The reason? A flawed investment logic of buying high and selling low as well as performance lingo such as “beating the market” which insinuates that you must go big or go home, to make money in the market. 

But many professional investors agree that investing is more about doing your due diligence and making smart decisions in the long term.

Commenting on the study, DALBAR’s CEO, Louis Harvey said that setting clear long-term goals and measuring success against them would help investors achieve their goals.

As Warren Buffett famously said: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

One anecdotal story shows us that there is still a very long way to go in terms of educating some investors.

When the famous game Pokemon Go launched in 2016, investors rushed to buy shares in Nintendo and within a month, Nintendo’s market capitalisation more than doubled. Investors no doubt wanted to cash in on the ‘hot’ cultural phenomenon.

They didn’t realise however that Pokemon Go was in fact not a Nintendo product and that the company would not benefit in the way investors had imagined. Even though Pokemon Go didn’t use any Nintendo branding and that Nintendo’s (lack of) involvement was public knowledge. 

Three days after their skyrocketing share price made the news, Nintendo had to issue a warning, explaining that they were not the distributor of the game and would only receive a limited licensing fee for original ownership. 

Nintendo share prices plummeted as the new shareholders sold off their shares. 

Ironically, Nintendo made $115 million in licensing fees for Pokemon Go in the first year and saw a spike in their hardware sales due to a “halo effect”.

The company has made $2.5 billion on the Pokemon Go Franchise as of 2019.

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Sources:

• Market Watch: Most investors have no idea what they are doing
• sarwa: Top 10 Warren Buffett Quotes To Inspire Your Investment Goals
• The Verge: Nintendo has doubled in value since Pokémon Go’s release
• The Verge: Nintendo shares plummet after investors realize it doesn’t actually make Pokémon Go
• Nintendo: Notice regarding the impact of “Pokemon GO”on the Consolidated Financial Forecast
• Game Revolution: Pokemon Go has helped Nintendo earn $2.5 billion from Pokemon on mobile