It is commonly reported that the stock market averages about 10% per year return over the long term (decades). So the investor that buys and holds a diversified portfolio of stocks or mutual funds is led to believe that their portfolio will grow by 10% per year on average. You know the mantra, “Not to worry, I’m a long term investor. On average, I’m earning 10% per year.”
There is only one problem here. The facts, as you will see in a moment, state otherwise.
Let’s assume for a moment that an investor could match the stock market average return of 10% per year (not likely, by the way, as most professionals fall short of this goal). Further assume the market averages 10% per year over a four year period:
Year - Ac Size - YR Return - Av Return - Av Return
0 $100,000
1 $ 80,000 -20% -20% -20%
2 $ 72,000 -10% -15% -14%
3 $ 93,000 +30% 0% -2%
4 $131,040 +40% 10% +7%
From the above example, you can see that our investor who managed to match the stock market performance year by year finished with an average portfolio return of only 7%, not 10%. Underperforming the stock market averages will always be the case, no matter what market period is selected - past, present, or future. So, can you expect to average 10% a year in a diversified portfolio of stocks and mutual funds (that you buy and hold) in a market that averages 10% per year? The answer is clearly, “No!”
This is one reason for considering alternative investments for a portion of your portfolio, such as a good trading system that provides superior returns in non-correlated markets.
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
If you would like to learn about the stock market and
you have a computer and a burning desire to seize
success, then you have what it takes to personally
unearth Bill’s Astonishing, step by step trading secrets
…BUT ONLY FOR A LIMITED TIME.
stock market
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
Alfred Winslow Jones started hedge funds in 1949. He was... Read More
The bear market that showed up at the end of... Read More
All stock trading and investing methods must deal with the... Read More
Now where have I heard that before? I know. It... Read More
Everyone who invests in the stock market wants to be... Read More
Most stock traders know that momentum trading can be a... Read More
I have been trading for several decades and was an... Read More
As one of my regular readers you know I have... Read More
Two weeks ago I wrote about what the Securities and... Read More
Everybody is riding the Wall Street Roller coaster. Even if... Read More
All of the talking heads have been telling us that... Read More
After some forty years of banking and investments, I retired... Read More
We are already in it, but you can't see it.... Read More
As I said in Part I everyone in the insane... Read More
There is a famous cliff on the ocean in Acapulco... Read More
I would like to share with the reader an article... Read More
Wall Street has been preaching for years and years to... Read More
Ever have one of those sample boxes of candy? Each... Read More
How can you dispel an illusion unless you look directly... Read More
As GuruFocus updates the stock buys and sells of gurus,... Read More
Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More
With over 6,000 mutual funds available, it may be tempting... Read More
Mutual funds were created with the idea that one person... Read More
Today we are inundated with tons of information about the... Read More
For the last 12 years we have seen the Japanese... Read More
maide service in Buffalo Grove ..The bear market that showed up at the end of... Read More
First let's see what protectionism is. According to Mr. Webster... Read More
I receive emails from Morningstar. This company provides statistics and... Read More
As a novice trader, you'll often feel the need to... Read More
Before we get into all the good news out there,... Read More
AS BUILDERS BEGIN WORK ON THE FREEDOM TOWER in New... Read More
Every Wall Street analyst, financial planner and broker will tell... Read More
Quick, look out the window. It's raining. No, the sun's... Read More
If you've ever flipped on the television to CNN Financial... Read More
The World Bank claims that some two billion of the... Read More
Most stock traders know that momentum trading can be a... Read More
Everything you invest in has risk so you want to... Read More
Spread trading is a technique that can be used to... Read More
To become a successful trader you must have some kind... Read More
I have watched my cat play with a bag of... Read More
What account size do I need?How much money can I... Read More
Two weeks ago I wrote about what the Securities and... Read More
Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More
Every publicly traded company is required by the SEC(Securities and... Read More
Sometimes the best way of lowering exposure to risk is... Read More
It is wonderful to be alive in the information age.... Read More
Did you know you can make money (and a lot... Read More
When purchasing mutual funds we are cautioned to read the... Read More
Professional stock options traders use the term lean to refer... Read More
For the year 2000 we have seen hundreds of mutual... Read More
Stocks & Mutual Fund |