An Average Investor
Over the years, I have seen many studies comparing the average investor returns to the stock market and other asset class returns. One study over the 20-year period from 1996-2015 found the average investor had an average annual return of 2.1%, while the S&P Index had an average annual return of 8.2%. And this makes a difference. Consider a person saving for retirement and investing $5,000 annually over that 20-year time period. At the average investor rate of return of 2.1%, the individual has $125,281 at the end of the 20 years. If the person had simply invested in an index fund that tracked the S&P Index over the same time period, at the end of 20 years, he would have $250,126 or over $100,000 more dollars. On this page, we are going to discuss how to avoid being an average investor.
Rule 1 to Avoid Being An Average Investor
Rule one to avoid being an average or worse investor is to understand the only time you make or lose money on a investment is when you sell it. This seems obvious, but it is amazing to see how often investors look at an account statement and think how much they have made or loss…