The upside of indecision
Investors who don’t currently know where they intend to focus their investments in 2012 could actually be in a relatively good position.
There can be danger in overconfidence in investing – which research suggests can lead people to overestimate their knowledge and ability to control events and underestimate risk. Those unsure about their investing focus for this year may be less inclined to fall for the thinking trap.
Economist Chris Dillow’s blogpost for eZonomics on the Two sides of overconfidence highlights the positives and negatives of the condition. The negatives, Dillow writes, include some investors’ tendencies to own shares in the industry in which they work, mistakenly thinking their commercial knowledge will help them to pick winners. The positives include motivating investors to try hard, put in time and effort and – sometimes – drive success.
What about cash?
A popular asset class not included in the poll response options is cash deposits. As the ING Be Good at Money video tutorial on basic investment products explains, cash is at the less risky end of the investing spectrum. Cash deposits deserve a mention here because they can be a helpful part of an investment portfolio. The proportion held in cash will depending on individual’s comfort with financial risk and their expectations for returns (possibly informed by the lifecycle approach to investing).