Index Investing: From Theory to Practice · Dr MAI Huu Minh, TRAN Phan Bao Ngoc & HUYNH Nguyen Quoc BuuChapter 23 of 37 · Module 6: Invest
CHAPTER 23
Behaviour and Pitfalls
Why good funds produce poor investors — and how to protect yourself from yourself
Opening question
“My index fund returned 9% a year over the last decade. Why have I made so much less?”
In this chapter
- The behaviour gap between fund returns and investor returns
- The biases behind it: overconfidence, loss aversion, herding, recency, the disposition effect, home bias and FOMO
- The cost of market timing and of missing the best days
- The illusion of diversification in concentrated indexes
- Product traps: thematic hype, leveraged ETFs, structured products and expensive "index" funds
- Vietnam: retail trading, margin and the short-term culture
- Building rules that protect you: an investment policy statement, automation and checklists
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 23 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Index Investing: From Theory to Practice (Volume 1, NXW Investment Library).
Read Chapter 1 freeGet the full book — contact@nxw.vnSections of this chapter
23.1 The behaviour gap
23.2 How our minds mislead us
23.3 Loss aversion and prospect theory
23.4 Chasing performance and timing the market
23.5 The diversification illusion
23.6 Product traps
23.7 Vietnam and Asia: retail markets and short horizons
23.8 Rules that protect you from yourself