Stop Believing These Investment Myths That Are Keeping You Broke
In other words, add some bonds. Add some real estate, add some foreign markets to the mix.
Make the S&P 500 the core part of your stock portfolio and “explore” with the rest of your investment funds, adding these other types of investments
Read a book on investing psychology. There are many good books and they will help you dramatically.
Myth #2: Growth stocks outperform value stocks
Growth stocks like Apple and Google make you more money than boring stocks like Walmart, General Electric and AT&T.
Hey, who doesn’t love a great growth story? Apple going from $3 per share to $153, Amazon rising from $10 to a staggering $800 per share and so on. They’re fun and sexy and make great copy for articles and front covers for magazines.
These disrupt old industries and many improve the economy and improve our lives, and they make twenty-somethings into billionaires. (Although I hate to say it, but a 26-year-old Snapchat billionaire tees me off!)
But there are more facets to the growth vs. value stocks debate. Once again, evidence shows that the boring path wins over time.
In 2013, Ibbotson’s yearbook showed that value stocks (read: boring) had a clear advantage over growth stocks.
From 1928 to 2012, large cap growth stocks grew at an average rate of 8.8% while value stocks earned 11.0%.
That’s additional growth of 22% in your investment account.
Why do value stocks edge out growth stocks? It’s a question of price. Growth stocks do, indeed, grow at faster rates than value stocks for a period of time, but growth stocks already price in rosy future growth.