The Simplest Long-Term Investment Strategy You'll Ever See
Editor's note: Over a recent 20-year period, stocks returned more than 8% per year.
But the average individual investor made just 2.3% a year.
How is that possible? (Hint: It all begins with proper asset allocation.)
In today's Masters Series – originally published in the February 20, 2015 edition of our free DailyWealth e-letter – Steve Sjuggerud explains why this happened... and shares the single easiest way to improve your investing returns...
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.
Exchange-traded funds (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 Sjuggerud
Editor's note: Last Wednesday, we hosted our Stansberry Portfolio Solutions webinar – one of the most popular nights in Stansberry Research history. If you missed it, don't worry. You can still watch a replay of the event, where you'll hear Porter's latest thoughts on bitcoin... Dr. David "Doc" Eifrig's brand-new bearish prediction... and why everyone is congratulating Steve. Watch the replay right here.