One of the disappointing things about, mainly, the stock market is that private investors are truly terrible at deriving benefits.  Not so the residential property market.  When it comes to their own homes, people tend not to sell when the market drops; partly because they need a roof over their heads, partly because property is illiquid and most difficult to sell just when you need to do so most quickly, but mainly because homeowners do not want to realise any apparent loss on their home.

The good news for homeowners has been that they spend their 100% of the time invested in the market and, even though they experience slumps in value from time to time, they are always ideally placed to benefit from any upturn.  If you expect the trend to be upwards over the long term, this is a rational way to behave, even if the reasoning is less than analytical.

If we contrast this behaviour with that of the same people in the stock market, it tells a very different story.  Investors seem to head for the market at outset with no particular plan in mind and no thought to timescales or their own expectations.  Perhaps, they have responded to lurid headlines of fantastic returns being made somewhere and worry about missing out.  This may be why so much retail money floods into the fashionable sectors and funds.

If the market drops in value, these same investors sell quickly and move into, for example, cash, worried that losses would become even greater.  Worse still, many simply look at the best performing fund over the last three years, say, and decide to pile into that.

This is why the latest research from Lipper Feri is so depressingly familiar.  Outflows from some very sensible sectors are huge and funds like the Merrill Lynch Blackrock Gold & General Fund have benefited enormously, in its case to the tune of more than £300m.  Now, I am not suggesting that this is the bottom of the market, nor am I saying the Gold & General Fund, which has ridden the good news in commodities, is the wrong place to put money.  All I say is that it is pretty depressing to see all these investors chasing their tails, most simply guaranteeing that they will lose money.

Far better, surely, to have some sort of plan at outset and to use knowledge of the past to manage expectations of the future.  As people have discovered in property, buying into the market and sitting tight forever is not a bad strategy.