The Simplest Long-Term Investment Strategy You'll Ever See
Editor's note: If you're anything like most investors, your portfolio returns are minuscule compared with the overall market.
Today's Masters Series essay was originally published in the February 20, 2015 edition of our free DailyWealth e-letter. In it, Steve Sjuggerud explains why improving your results is easier than you might think...
The Simplest Long-Term Investment Strategy You'll Ever See
Is your goal as an investor to beat the market?
If your answer is yes, I have news for you...
Not every investor can beat the market. And in many cases, trying to beat the market can shatter your long-term gains...
The truth is, most investors don't come anywhere near beating the market. The chart below tells the story. It shows just how bad returns have been for the typical investor over the past two decades...
While U.S. stocks increased 8.2% a year over this period, the average investor saw less than a third of those gains... just 2.3% a year.
That's actually much worse than it seems over two decades of investing. After 20 years, a $10,000 investment at 8.2% turns into $48,367... a 384% return. The same investment at 2.3% a year turns into just $15,758... a 58% gain.
Said another way, the average investor earned just 15% of the long-term gain on stocks over this 20-year period.
There are plenty of reasons why the typical investor underperforms... High fees, lack of diversification, and trading in and out of the market at the worst possible times are culprits.
The last point is key... investors tend to buy into stocks at the top and sell at the bottom. It crushes their long-term returns.
ETFs can't solve that psychological barrier. But they do offer an easy way to make long-term investment decisions.
Whether you'd like to build a simple portfolio of 60% U.S. stocks and 40% bonds or a complex portfolio with a dozen asset classes, ETFs are a great tool.
You see, ETFs are easy to buy and sell. And more than 1,000 trade in the U.S. So you can invest in just about anything you'd like.
Take a look at the table below. It shows a mock long-term portfolio... And how you could build it in just a few minutes with just a few transactions fees using ETFs...
Now, I'm NOT saying you should invest in this portfolio. Or that this is the right portfolio for you over the long term.
But I will say that if you bought this portfolio today, and held for 20 years, you'd likely beat the average investor (who earns just 15% of the market's performance).
The great thing about ETFs is that they allow you to find the portfolio mix that's right for you. And they allow you to build that portfolio quickly and easily.
Good investing,
Steve
Editor's note: Proper asset allocation is a huge factor in your success as an investor. That's why Steve, Porter, and Dr. David Eifrig have teamed up to create Stansberry Portfolio Solutions. It will show you exactly how to create a safe, diversified portfolio. Best of all, it takes less than one hour a month. Get the details right here.