Do you put more thought into buying a stock or selling it? Presumably, it’s the former because it’s official: we’re bad at selling stocks.
Or at least professional portfolio managers (PMs) are, according to a report called Selling fast and buying slow: heuristics and trading performance of institutional investors. The study tracks 4.4 million buy and sell events across 783 portfolios between 2000 and 2016. These professionally managed portfolios had, on average, some $573m of assets under management – so you would think the people in charge of these portfolios are pretty good at what they do.
And they are – when it comes to buying. But the study uncovers a striking pattern: PMs demonstrate clear skill in buying but their selling decisions underperform substantially. In fact, the study finds that the fund managers in the dataset would have been better off dumping shares completely at random.
This doesn’t mean the next time you want to make a trade you should just put on a blindfold, start clicking, and see what happens – but If you think you have been faring better than these PMs, how do you know? Have you been tracking the performance of sold shares? Perhaps…
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