There are so many things to say and so many data to analyse when it comes to the performance of individual investors in stock markets. The most striking fact is that most individual investors lose money regardless of the country they live in.
Barber, Lee, Liu, and Odean in a 2009 work named “Just How Much Do Individual Investors Lose by Trading?” compared trading performances of Taiwanese individual investors to those of professionals. The results of the study were that individual investors were strongly under-performing the professionals. Their results indicated that individual investors net returns were in average roughly 3.8% below market returns. Under-performing professionals by 3.8% might sound ok to novice but the truth is that this is an enormous difference. They also found that three factors mainly explained the poor performance of the individual investors. These three factors were perverse stock selection ability, commissions (this is very often an overlooked factor), and finally the transaction tax. Other earlier studies (Barber and Odean, 2000, 2001) found that in the United States trading losses and costs for individual investors were about 2%. The Barber, Lee, li and Odean study concluded with the following: ““Just how much do individual investors lose by trading?” remains: Too much!”. However, the good news is that individual investors who are guided by financial advisors tend to perform much better. For instance, the vast majority of individual investors who have been advised by Anh Thomas Investment have managed (by buying Vietnamese shares) to outperform the indexes over the last couple of years. Just contact us at info@anhthomas.com if you want to find more about our services.