Where Are My Investment Returns?
Do you often look at your investment statements and wonder what is going on? Do you wonder where and how your returns are coming in? Are you frustrated with the returns you’ve gotten over the years? Do you wonder if there is a better way?
According to Dalbar, Inc., an independent research firm that tracks investment returns and investor behavior, found that the average stock investor received a miniscule 1.9% over the last 20 years, ending in 2008. In other words, investors took on a lot of risk to receive a CD rate of return. During that same time period, the S&P500 (an unmanaged index) returned 8.4%, almost a 7% difference!
So, why have investors failed to get market rate of return for the last 20 years? It generally boils down to the four most common mistakes:
1) Poor (or wrong) investments. Investors generally have no idea what their investments are about, and have no idea what they are intended to do. Investors generally grab a handful of mutual funds, hoping that they will perform well. If not, replace them when they don’t do well. Often times, investors will buy a mutual fund based on past performance (which means nothing), or buy a fund based on an advisor’s recommendation (based on past performance, which means nothing).
2) No plan in place. Do you have an investment policy statement? If you don’t have one, you are in investing trouble. An investment policy statement will outline your investing objectives, target specific funds, outline your strategy (in market up’s and down’s), and hold you accountable. It will also eliminate ‘behavior’ mistakes.
3) Behavior (or emotion) based investing. Investing based on emotions is a dangerous activity. Barron’ Magazine found that 9 out of 10 investor decisions ( selling or exchanging investments) based on emotion where incorrect in the end. So, what are the odds that your ‘gut’ is telling you the right thing?
4) Not knowing where returns come from. This is the crux of investing. If you don’t know where returns come from, how will it be possible for you to get them? There is over 60 years of academia studies that show where returns come from, and they don’t come from a broker.
Do you have a ‘peace of mind’ about your investing strategy? If you’re not sure, or feel you should be doing better, I invite you to contact an investment coach at Wealthabundance Wealth Management. Wealthabundance coaches are independent, un-biased coaches that will show you how to achieve a better retirement, a better life-style, and a more enjoyable life. Contact a Wealthabundance coach at 920-202-3765, or visit www.wealthabundance.com