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Next Stocks Mutual Funds Topic : Investment Discipline - One of the great "secrets" of successful people is discipline and it doesn't make any difference whether it is manufacturing, processing, servicing or investing in the stock market.Before you can have that discipline you must have a successful plan and stick with it. If the method you use does not work or results in smaller profits it should...[ read more]
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Trading Tips No 2: The Big Lie in the Stock Market
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. -=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
Related Products For Download: Read Next : Investment DisciplineOne of the great "secrets" of successful people is discipline and it doesn't make any difference whether it is manufacturing, processing, servicing or investing in the stock market.Before you can have that discipline you must have a successful plan and stick with it. If the method you use does not work or results in smaller profits it should...
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