StockMarketCrash2020
This shocking data comes from the just-released 2019 Quantitative Analysis of Investor Behavior report by DALBAR, the leading independent, unbiased investment performance rating firm, and it covers the 20-year period ending December 31, 2018.
DALBAR, Inc. is the financial community’s leading independent expert for evaluating, auditing and rating business practices, customer performance, product quality and service. Launched in 1976, DALBAR has earned the recognition for consistent and unbiased evaluations of Investment companies, registered investment advisers, insurance companies, broker/dealers, retirement plan providers and financial professionals.
What kind of return would you have to get in the stock market to make it worth the risk and gut-.wrenching ups and downs?
Would you put your life’s savings at risk for a 5% annual return?
Or would you require at least a 7% return?
Or maybe even a 10% annual return?
If you’re like most people we’ve surveyed, you wouldn’t do it unless you thought you could get at least a 7% annual return over time, right?
Here’s the Harsh Reality of the Actual Returns Investors Are Getting…I hope you’re sitting down because this is going to floor you: According to a new study, the typical investor in equity mutual funds has gotten only a 3.88% annual return… over the last 20 years!
But it’s actually much worse than that. Here’s why…
Have you heard the phrase “nominal return“? That’s the rate of return on an investment without adjusting for inflation. And inflation for the past 20 years covered by the study averaged 2.17% a year. So let’s do the math:
3.88% average annual return
-2.17% average annual inflation
=1.71% real average annual return
Oops!! A 1.71% real average annual return for the last 20 years?!? The study did take into account the average brokerage you pay in these accounts. But it did not account for the taxes you’re going to pay if you’ve been saving in a tax-deferred account. That assumes tax rates don’t go up over the 20 to 30+ years of your retirement.
How did other types of investors fare over the last two decades?
Answer: Even worse than equity mutual fund investors did. Much worse!
The average investor in asset allocation mutual funds (which spread your money among a variety of classes) earned only 1.87% per year over the last two decades, but because inflation averaged 2.17% a year, they actually ended up losing 0.30% every year for 20 years.
But the biggest losers were investors in fixed-income funds. They only managed to eke out a 0.22% average annual return, significantly trailing inflation and digging deeper and deeper into a hole every year.
Once again, the study concluded that…
Stock-Market BIG Lie is that You Must Risk Your Money in Order to Grow It
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