- Although the worst-case outcomes for the investing in the S&P 500® Index seem uninviting, the index has provided reasonable returns the vast majority of the time.
- The worst-case 5-year holding period for the index produced an annualized real return of -13.233%; however, over 80% of the time the 5-year holding period produced a positive real (inflation-adjusted) return.
- Further, the worst-case 45-year holding period for the index produced an annualized real return of only about 3.5%; however, 90% of the time the 45-year holding period produced a solid annualized real return of close to 5% or better.
Continue reading “Why Invest Forever? (Part 4)”
- Since 1973 the S&P 500® Index has posted considerable gains—over this period the index has averaged over 10% per year in gains after reinvesting dividends, before taxes and fees.
- However, investigating other 45-year periods (going as far back as 1871) leads to a more useful picture of the index’s performance across differing economic environments.
- According to history, it’s better to invest in the index over longer periods in order to increase the likelihood of providing favorable returns and decrease the likelihood of losing money.
Continue reading “Why Invest Forever? (Part 3)”
- Research suggests that less than one percent of professional active manages are “skilled” at what they do.
- Given this, the odds of picking a solid active manager is not just slightly worse than a coin toss; in fact, the chances are closer to slim to none.
- Therefore, a passive investing strategy may be more sensible over the long run for most investors.
Continue reading “Passive is the New Aggressive (Part 7)”
- Over long periods, a passive investing approach in index funds is more likely to lead to an outcome that falls in line with a given benchmark.
- With an active investing approach, where mutual fund fees are higher, outcomes are far less certain.
- As such, the long-term opportunity cost of an active approach can be significant, and perhaps even disastrous.
Continue reading “Passive is the New Aggressive (Part 6)”