Who are the nation's best investors? If you guessed people who work in finance, you'd be dead wrong.
The investors that performed the best over the past year are teachers, according to a sample of 20,000 investors who use a free investing app called Openfolio.
Teachers earned a tidy 10.2 percent on average over the past 12 months, versus just 7.6 percent for the average investor. The second best-performing group were those who work in technology, earning an average of 8.3 percent. Financial professionals came in fourth, with a 6.9 percent return for the year. The only tracked group that did worse were government workers, who earned just 3.4 percent, according to Openfolio.
Some might argue that one year's performance does not make a trend. But the teachers outperformed their peers because they employed time-tested strategies that, while simple, are hard to follow if you're watching your portfolio too closely. Namely, they traded less than average diversified more and had less money invested in cash.
"They follow conventional wisdom that a lot of people have a tough time with," said David Ma, head of business development at Openfolio. "Had we seen that they were outperforming because they were betting on a bunch of risky stocks, we wouldn't have been as impressed. But they were doing well by being smart."
More specifically, where the average investor traded 9.1 times last year, teachers traded just 6.1 times on average, according to Openfolio. (Financiers averaged 8.5 trades.) Instead of investing in individual stocks, teachers put 52 percent of their assets in widely diversified mutual funds, versus 46 percent for the average investor and 43 percent for financial professionals.
Where the average investor had more than 17 percent of his or her assets in cash, meanwhile, teachers had just 12 percent in cash, which put more of their money to work.
Notably, where the findings came as a surprise to the seasoned Wall Street executives who launched Openfolio, Steve Schullo and Dan Robertson, two retired teachers who authored "Late Bloomer Millionaires," said the results were consistent with their experience.
"There are a lot of teachers who are very savvy investors," Schullo said. "You just don't hear them brag about it."
Adds Robertson: "My guess is that teachers benefit from being too busy with kids, classrooms and grading papers to spend a lot of time trying to predict where interest rates will go or what's going to happen to oil prices. They don't have time to tinker with their investments and that's a big benefit."
Schullo and Robertson add that anyone can invest as wisely as a teacher. Indeed, there are just three keys.
First, think long-term, which means you don't buy or sell investments because of a temporary market upheaval. Also watch costs by trading through discount brokers, or, better, by investing through widely diversified index funds, such as the low-cost funds offered by Vanguard. Finally, diversify, which can also be done simply by buying index funds.
Robertson suggests that every investor own just three funds -- one that invests in an index of U.S. stocks; one that invests in an index of international stocks; and a bond market index fund.
"People like to make this sound complex -- or act like, if you didn't get started at 20, you're sunk," Schullo added. "In reality, it's pretty straightforward, and we're proof-positive that you don't have to start early; you don't have to be fancy. You just have to get started whenever you can and then stick with it."