Rich people aren't any better at investing than the rest of us
"It's either heartening or depressing, based on your point of view, that people with money make the same ridiculous mistakes that everyone else does," Sullivan writes.
A survey Sullivan and Dr. Brad Klontz conducted found the following, as described in "The Thin Green Line":
... The One Percent were actually more likely than the top 5 percent to make common investing mistakes. They were overconfident in their investing ability. They made more trades. They took pride in selling winners, and they were more likely to hold on to investments that had lost value instead of selling them, taking the loss, and moving on to something else.
They also invested in businesses run by friends - even though they said they knew it was a bad idea - and took friends' advice over that of a financial adviser on investments.
Although it seems counterintuitive (shouldn't people who have a lot of money be really good at investing?) Sullivan and Klontz's findings aren't revolutionary. Overconfidence is common in investors, and can lead to the belief that you should take action with your money. Investment adviser Ken Weber says that it's one of the most common traps that leads to making bad financial decisions.
And often, it is the people who are the most hands-on with their investments who ultimately earn the least, as shown in one case by an analysis of over 300,000 investors from online investment platform SigFig.
Even legendary investor Warren Buffett, who has admitted to making mistakes of his own, recommends that people take a hands-off approach by putting money in low-fee index funds and letting the market sort itself out over time.
For an example of what it might mean to be fully rational about money, read the question economist Richard Thaler posed to Sullivan.
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