November 26, 2007
Here's a simple test. As an investor, would you be able to sit back and do nothing -- as in zero, zip, nada -- in order to make an average 30% in annual returns over a 13-year investing horizon?
Peter Lynch, who ran one of the most successful mutual funds of all time, found that roughly 50% of his Fidelity Magellan investors failed this test and lost money on their investment, despite the fund's incredible performance over the long haul.
Getting in your own way is even more difficult when you invest in "passion brands" -- i.e., companies like Apple (Nasdaq: AAPL ) , Crocs (Nasdaq: CROX ) , Netflix (Nasdaq: NFLX ) , and Whole Foods (Nasdaq: WFMI ) -- since these brands appeal to the heart as well as the head. Once passions stir, and stocks like these see volatile trading action, it's easy to make a move simply to do something. Trades based on emotion call to mind Benjamin Graham's famous quote: "The investor's chief problem -- and even his worst enemy -- is likely to be himself."
The Motley Fool is here to help. With this hard-hitting public service announcement, "The Enemy Within," we help you recognize the over-emotional investor that lurks within all of us. If you see yourself resembling Frank, the tragic (and kind of hilarious) figure in this video, by all means, spend quality time with loved ones -- and leave your portfolio alone!
For more great CAPS TV:
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