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Myths and legends Print

The world of investing in and elsewhere is filled with myths and legends not easily distinguished from reality. Not convinced? Try to figure out which of the following statements are true or false. Click where indicated for the answer.


Myth 1: Passively investing, (choosing investments in order to track or follow rather than seeking to beat the overall market) is for losers. The argument in favor of passive, index investing is based on complex, unproven theories about a so-called equilibrium in the forces underlying the financial markets. True or false?

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Myth 2 : Any  reputable business school graduate can easily beat an index fund over a full market cycle. True or false? 

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Myth 3: Forget investing on your own. Superior intelligence and years of specialized studies and training are necessary if the average independent or self-investor is to hope equaling the track record of investment professionals. True or false?

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Myth 4: For the best long term performance of my portfolio, the following factors are ranked  by order of importance ( the first being the most important etc). True or false?

i)              choose shares of good companies ( or choose shares of companies that do business in good sectors of the economy) ;

ii)              choose the right moment to buy or sell; or

iii)             choose the right percentage of my portfolio for investing in shares.

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Myth 5: The costs assumed by investors in Canadian mutual funds are among the lowest in the world. True or false?

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Myth 6: To minimize  transaction costs  the do-it-yourself investor should invest directly (ie. without a broker) in government of bonds or certificates of deposit  through the Bank of Canada. True or false?

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Mith 7: The best indicator of the competence of your mutual fund manager is the return on your fund over the last several years. True or false?

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Myth 8: Preferred shares are more similar to an investment in bonds than in common shares. True or false?

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Myth 9: The level of mutual fund management fees (which you as a holder of fund units assume) are not important since they permit the fund to pay professional managers who work to give you the highest possible return on your investment True or false?.

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Myth 10: Securities regulations governing mutual fund advertising require fund distributors to include in their publicity complete historical fund performance results of their fund manager i.e. not only show performances in years or in those funds managed by the manager which outperformed the market. True or false?

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Myth 11: It is generally more profitable for independent investors to invest in mutual fund bond funds rather than to invest directly in bonds. True or false?

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Myth 12: The Canadian stock market is one of the major North-American and global markets (10%+ of the North-American  markets and 5%+ of world markets. True or false?

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Myth 13 : By trading online I can make a fortune. True or false?

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Myth 14 : If you save 1.0% in investment costs each year, and assuming the same rate of return, how much more will you have accumulated at retirement (after 30 years): 1%, 5%, 10% ou 20% ?

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Myth 15 : A good financial adviser will recommend that  I sell my stock exchange investments before the next market downturn. True or false?

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Myth 16 : Perhaps the average mutual fund manager does not beat the market. But with the help of friends, business acquaintances and my bank manager I have found a fantastic fund manager who I have no doubt will beat the market. True or false? 

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Last Updated ( Friday, 08 February 2008 )
 


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Quotation

Asset Allocation…offers an easy-to-maintain, reliable, long-term investment plan. That being said, asset allocation is not without major drawbacks. First, asset allocation is a boring strategy….Second, it is never the number one strategy for the year. Richard Ferri  

 
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