Are You The Best Person To Plan Your Financial Future? Kelly Greaton University of St. Thomas December 2004
Why This Issue Is Important • 50% of U.S. equities are owned by individuals. • One third of investors have not attended college. • 20% of investors want advice but have not acted. Source: Federal Reserve, NYSE Shareownership Study
Investment Landscape • Turbulent market performance • Recent corporate and analyst fraud • Uncertain economic outlook
Research Question Are there identifiable best investment practices* for private individual investors? *“Best investment practices” is defined as common recommendations of investment professionals.
Investment Professionals • Examples • Institutional Portfolio Managers • Private Financial Consultants • Equity Analysts • Required Criteria • Professional Experience • Financial Education
Methodology • Structured interviews with 20 professionals • 15 open-ended best practice questions • Generated 74 pages of response data
Sample Interview Questions What is an appropriate asset allocation? What are reasonable investment returns? How can an investor educate himself? What are investors biggest mistakes?
Professionals Recommend • Asset Allocation • 70-80% Stocks • 20-30% Bonds • Investment Returns • 7-12% Stocks • 3-5% Bonds
Professionals Recommend • Educational Tools • Newspapers • Investment Books • Financial Software • Objectivity • Emotional Caution • Sufficient Time • Patience
Most Entertaining Question What is your best investment advice? • Cut your losses quickly. • Follow the buying behavior of insiders. • Stick to your discipline. • Never follow the herd.
Research Question Are there identifiable best investment practices for private individual investors? Answer: Yes
Conclusion • Professionals can help minimize risk. • Experience matters when applying best practices. • Evaluate professionals and practices for a best fit.