The Simplest Long-Term Investment Strategy You'll Ever See
Editor's note: If you're anything like most investors, you can't get out of your own way.
From 1998 to 2017, the average investor trailed the returns of gold, stocks, oil, and bonds.
Today's Masters Series essay originally appeared in the February 20, 2015, edition of our free DailyWealth e-letter (we've since updated the numbers). In it, Steve Sjuggerud explains the reason for the underperformance... and shows a simple way for novices to easily improve their results...
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 7.2% a year over this period, the average investor saw much lower gains... just 5.3% a year.
That's actually much worse than it seems over two decades of investing. After 20 years, a $10,000 investment at 7.2% turns into $40,169... a 302% return. The same investment at 5.3% a year turns into just $28,091... a 181% gain.
Said another way, the average investor earned less than two-thirds 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 for folks who would prefer to invest in bigger trends rather than individual companies.
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 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. (And of course, here at Stansberry Research, we believe you can do even better than that by following our advice on buying world-class capital-efficient stocks when they go on sale... buying corporate bonds at a discount... or trading options for income... and incorporating risk-management tools like proper position sizing and trailing stops.)
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 two-thirds 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: ETFs are a great "one click" way to buy into bigger long-term market trends. But if you're looking to take more control of your portfolio, squeeze every cent out of the "Melt Up," and profit even as the market heads south, you MUST tune in to the event we're hosting on Tuesday at 8 p.m. Eastern time.
There, you'll learn Porter's No. 1 investing strategy... and exactly which Stansberry Research newsletters he recommends following today. He'll even give two lucky viewers a $5,000 prize, just for showing up. Save your seat by clicking here.