"It's just not that easy to make money in the markets; it requires discipline." These words resonate with self-directed investors who often find themselves underperforming the indices. The new Steady Wealth Podcast website, available at www.steadywealthpodcast.com, delves into the heart of this issue (and others), addressing the reasons behind individual investor underperformance.
Looking at actual statistics paints a sobering picture. A staggering 70% of US equity managers underperform their respective indices on a one-year basis, and this number climbs to a disheartening 90% over a ten-year period. Over a 20-year span, the S&P 500 has returned an average of 7.5% per year, while a typical 60/40 portfolio has yielded approximately 6%. Astonishingly, the average investor lags behind at a mere 2.9% per year.
One key problem lies in the trading-centric mindset adopted by most individual investors. They fail to tap into the power of compound interest, shying away from the proven strategy of buy and hold. Diversification becomes an afterthought, and distinguishing reliable information from dubious sources becomes a daunting task. Lack of discipline further hampers their ability to adhere to a long-term investment strategy. Overconfidence bias is a common pitfall among individual investors, leading to detrimental decisions.
To combat these pitfalls, it is recommended that self-directed investors allocate only a fraction (10-20%) of their assets to a trading portfolio, while entrusting the rest to professional guidance. By taking a free 3-minute risk survey at www.bluemarlinadvisors.com, investors can gain valuable insights into their risk profile and make informed decisions to maximize their long-term wealth.
What You’ll Learn:
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What it means to be an individual investor.
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Why individual investors underperform on average.
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How to understand your risk profile and correct it.
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And much more!
Favorite Quote:
“Individual investors often exhibit an overconfidence bias.” -Serge Berger
