Is Investment Management Mired In Myth?

This edition of Collective Insight seeks to address and debunk many of the myths that investors tend to cling to.

- Murray Anderson

Talk to anyone about investing, even those who are far removed from it, and you will hear all sorts of myths that people believe about investing and money.

How many times have I heard things like “The markets are rigged. Unless you know someone on the inside you’re on a hiding to nothing”, or “Fund managers all hang out together, so their portfolios all look the same”, or “You need a lot of money to invest”? And of course, a long-standing favourite: “XYZ asset management just won the Raging Bull award for the fifth time in a row – they’ve really got to be the best manager going now!”

Making money and then handing it over to other people is an emotional, and scary, act. It is no wonder people develop firmly held beliefs as a framework to cope with, and perhaps avoid altogether, the uncertainty of outcome. And because of this emotional dynamic, there is probably no other industry where, despite the weight of evidence of more than a century of market history available to us to study, people repeatedly behave the same way – even when they know it is irrational and costly to their financial health.

But there are myths and there are heuristics – those “rules of thumb” that we come to adopt and believe because they help simplify the discussions around what is understandably a very complex topic: investing and your finances.