Sumary of 4 Secrets to Beating the Average Investor:
- The average investor likely has a less-exciting future than you do.
- 1. You take market returns According to a 2020 study by financial research company Dalbar, average investors earned about 5% annual growth in their accounts over the last 30 years.
- That’s roughly half the average growth rate of the S&P 500 (SNPINDEX:^GSPC) in the same time frame.
- To be fair, the performance gap between the average investor and the S&P 500 hasn’t been quite as dramatic in recent years.
- 31, 2019, for example, the average investor earned 11.5% annually, while the S&P 500 grew by 15.3% annually.
- SPLG’s 10-year average annual return lags the S&P 500 by about 0.1% .
- The Vanguard ETF’s 10-year average annual return is only 0.04% behind the S&P 500. 2. You stay calm The Dalbar report finds that 70% of the average investors’ underperformance occurred in volatile markets.
- If you hold shares in an S&P 500 index fund, you own a portfolio consisting of the 500 largest and most successful public companies in the U.S. Most of these companies have a history of managing through turbulent markets, and then returning to growth.