How can a person improve their long-term investment return? The answer may surprise you. Many people can improve their returns by modifying their own behavior.
Let me re-state that: It may be your own behavior—not the market—that is letting you down.
Investment markets fluctuate constantly, but investors who stick with a balanced portfolio over the years tend to do well. An investment research firm regularly compares the average returns of the stock market with the actual returns earned by investors. The most recent survey showed that the S&P 500 stock index earned 9.2% per year over the last 20 years. The average stock fund investor, however, earned only 5% a year. Why is there such a gap?
Investor behavior is to blame. Investors generally do not invest their money in an indexed U.S. stock fund and leave it alone for 20 years. Instead, they buy and sell, often at the wrong time. With that in mind, what should a serious investor do?
It is the rare person who can successfully go it alone. Work with a fee-only advisor who can help you build a risk-appropriate, balanced investment portfolio.
For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.