We have discussed many investors' cognitive biases in the past at this blog post, one key reason people keep on speculating is they tend to overestimate their abilities to time the market. Such over-confidence bias leads to over-trading, unfortunately, over-trading leads to inferior returns, as shown in the chart below.
Furthermore, if you try to time the market, and unfortunately just missed 10 days of the biggest return days between 1988 and 2014 (total 6,824 trading days), how about your return? See the chart below -
In our next blog post, we will show the realistic long term stock market return an investor could expect.