Stop Believing These Investment Myths That Are Keeping You Broke
This has nothing to do with historic performance, fees or other technicalities. It's because...wait for it…boring!
Choosing to invest in an S&P 500 is a one decision “decision” that is supposed to last you for the rest of your life.
Most of us could not stand idly by without doing something for the rest of our lives. Markets go in cycles. They go up, they go down. Sometimes they go down mildly, and sometimes they go down horrendously. Unfortunately, the average investor can’t stomach the pain and a huge number of them will act to reduce it, namely by selling their shares.
So here is my first myth that is keeping you broke.
Myth #1: S&P index funds guarantee investing success
“I should invest in the S&P 500 and it should be the only stock investment I should make!”
The reality? It could be your worst.
So you may ask how I know this. Well, I have proof. Numerous studies have shown that, while the S&P 500 had earned over 8% annually during the period of 1996-2015, the average investor earned only slightly over 2%. That is $320,000 of lost earnings on a $100,000 investment over 20 years.
What accounts for this disturbing differential? I think it’s the emotional impact of suffering through market volatility. It is a result of the compelling force to have to do something during periods of distress. Like I said at the beginning: we would all love to avoid market downturns.
So what can we do about it?
Create a diversified portfolio of investments that Yin while others Yang.