64% of investors were chasing pastreturns when they switched(moved to a better-performing portfolio).

making switches after investing to try andtime markets.

leaving money in cash over long periodsinstead of in a diversified portfolio, or

What did we discover about the South African market from analysing over 17,000 investors over 10 years?

Nearly 1 in 4 investors opened a behaviour gap of 1% per year ( 10% over 10 years). During a market crash(2008/09) this doubled to 1 in 2 investors and increased the behaviour gap to 1.1% per year (11% over 10 years).

There is about 2.5 times the ‘switch itch’ generatedby a better-performing portfolio (3% or less) than bya portfolio performing well (15% or more).

What does this ‘behaviour tax’ mean in rands and sense? Example of R1,000,000 invested at 10% interest…

What’s the good news for investors? How can they ‘MIND THE GAP’?

1 in 3 investors wouldhave received at least 1%per year or more inreturns if they invested inthe equivalent outcome-based investing portfolio

1 in 10 investors wouldhave received 3% peryear or more in returnsfor remaining invested inthe equivalent outcome-based investing portfolio.

The equivalent outcome-basedinvesting portfolio would haveoutperformed the investors’initial selection by 0.70%per year on average if theyremained invested.

ormorethan

Switching early on inan investment journeycould cost investors over

R220 000 over 10 years

R4 millionover 30 years in lost returns.

This would be

25%of capital.

Switching during a market downturn doubles the chances of opening the behaviour gap and could cost investors nearly

R250 000 over 10 years

ormorethan

R4.5 millionover 30 years in lost returns.

Switching when the portfolio dips by 3% or more opens a larger gap for many investors and could cost nearly

R300 000 over 10 years

Understanding the‘cost of being human’ Understanding the‘cost of being human’

Our emotions are one of the biggest drivers of our investment decisions and consequently our investment returns.Depending on the market cycle and how it makes us feel, we may leave large portions of our wealth un-invested,we may be overconfident and overactive with the portion that we do invest and, in the end, we often give into our strong psychological tendency to buy high and sell low. We should always stick to these principles:

Don’t worry about timing,get your wealth to work

for you as soon as possible

Invest in an outcome-basedportfolio that is diversified

across asset classes, investmentstrategies and mandates

to spreak your risk

Have some windfall (cash) inplace to ensure you are not

forced to sell your long-terminvestments and invest the rest

Review the plan periodically,rebalance and ensure everything is on track

A behaviour gap opens when investors make decisions that leave a gap between what they should have earned andwhat they actually earned on an investment. For example:

More informationTo find out more about our outcome-based investing philosophy, or scan our barcode here to visit our website, momentum.co.za/investments.

Momentum Investments is a division of MMI Group Limited, an authorised financial services (FSP6406) and credit (NCRCP173) provider.MMI Holdings Limited is a level-1 B-BBEE insurer.

Please note: The research was performed by Momentum Investments in conjunction with North-West University on a dataset of 17 600 Momentum Wealth investors from 2008 to 2018.