The Simplest Long-Term Investment Strategy You'll Ever See
Editor's note: If you're reading this message, we know you're interested in investing...
And as someone who is interested in investing, you likely want to do what it takes to maximize your returns. Unfortunately, the average investor struggles to do that...
As our colleague Steve Sjuggerud explains in today's Masters Series essay – adapted from the February 20, 2015 edition of our free DailyWealth e-letter – the average investor failed to keep up with the returns of gold, stocks, oil, and bonds during a recent two-decade span.
In addition to highlighting the main reason for the average investor's underperformance over this time period, Steve details an easy way for novices to 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 during a two-decade period from 1998 to 2017...
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 the 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 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 it for 20 years, you'd likely beat the average investor (who earned just two-thirds of the market's performance in the two-decade stretch from 1998 to 2017).
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'd like to learn how to make more money with less work in 2020, we encourage you to join us for a FREE special event on Tuesday, January 14, at 8 p.m. Eastern time...
Steve will sit down with Stansberry Research founder Porter Stansberry and Retirement Millionaire editor Doc Eifrig to reveal their 2020 market predictions for the first time. You'll learn what's next for the "Melt Up"... the single place you should put your money this year... and each of their No. 1 favorite stocks for 2020. Reserve your spot right here.