Common Portfolio Wisdom – STOCKS HAVE ALWAYS OUTPERFORMED OTHER INVESTMENTS

 

Michelle Bertram and Beverly Bertram are financial advisors living in Mineral Point WI and serving the surrounding communities. Michelle Bertram does financial planning for retirees along with business consulting. Beverly Bertram specializes in retirement planning and income planning for her clients. Michelle Bertram and Beverly Bertram are authors of the book, Creating You DREAM Retirement and creators of the DREAM Retirement Process. Serving Madison WI, Verona WI, Mount Horeb WI, Barneveld WI, Dodgeville WI, Dubuque IA, Platteville WI, Lancaster WI, Cuba City WI, Fennimore WI, Darlington WI, Monroe WI, Spring Green WI, Black Earth WI and beyond

Pros –

This is true when you look at charts from the 1920s on.

Cons –

There have been significant long-term periods where even cash outperformed stocks within a buy and hold context.

 Axiom –

The stock market is a great place to invest money, but not all the time.

There are numerous so-called gurus out there that will tell you to always invest in the market, that long-term the market makes 10%+ per year. One of my favorites is a guy who is great at talking about getting out of debt and the basics of starting a financial plan, but when he starts talking about investing, he uses unreal numbers for returns saying you should expect 12% per year. However, if you read the fine print, he says that sin

ce the market’s inception in 1923, it has averaged 12% per year. Here is the key question, can you invest your money now and leave it alone, not touch it, don’t need it for 70 plus years? What about even 20 years? Ten years?

Yes, since 1923, stocks have outperformed other investments for that length of time, however, there have been many shorter periods of time that is not the case. From 2000 to 2009, the market endured a major terrorist attack and a recession. S&P 500 reflected those tough times with an average annual return of -1% and a period of negative returns after that, leading the media to call it the “lost decade.” Even cash outperformed stocks during that time.

Stocks are just one of six broad categories where you can invest your money, others include bonds, real estate, insurance-based products, bank and credit union vehicles, and commodities. Each of these categories can play a role in a successful investment plan, some for shorter periods of time and some longer. The right allocation and movement between them is the key.

How do you do that you are probably asking? The answer first lies within the more that math for you, what you want, what you need for financial security and financial peace. Then, the next part is the who, who is going to do this for you.

The who first and foremost needs to be more concerned with you than with any investment vehicles, they should be able to offer advice and help in multiple categories (or colors of money as described in our book) and who has a team of experts working with them. Investing in today’s market skillfully and successfully is much more involved than the buy and hold of the past. The market is constantly moving, following trends, watching signals, trading appropriately is something that doesn’t need to happen just monthly, or weekly or even daily, but hourly.

For more information, to request a copy of our book or sign up for an upcoming webinar.