Stop the insanity

We all have seen it. You are driving down the road and someone is weaving in and out of traffic trying to find the fastest lane. Temporarily, he or she may find it, but remarkedly that person is next to you at the next stop light. Even if this person were to arrive at his or her destination faster than you, I am sure it would not be by much time and they incurred more risky driving conditions. We also see this in investing time and time again. Instead of constantly changing lanes to find a better one, many investors chase returns. The actual research has escaped me, but I recall reading that the average stock investor has made about 2% a year while the stock market in general has returned on average about 10.5% a year. Why? Because, they tend to buy and sell their investments far too frequently. In fact, the average investor tends to sell off investments that are underperforming (sell low) and accumulate investments that are already performing (buying high). Haven't we all heard the adage of buy low and sell high? A lot of this certainly has to do with the emotional responses of greed and fear, but also is a huge indication of how fickle and cyclical the markets are. What is today's winner is tomorrow's loser and vise versa. If anything, we should be adding money to those investments that are underperfoming and shaving off a bit from those that are outperforming. As I say time and time again, set up a properly diversified asset allocation for your personal needs and leave it alone. Please don't buy all the investments that performed the best this year. Please don't chase the high flying stocks and/or mutual funds. Please stop the insanity! Didn't we learn this in the late 90's?