How about an investor that got in the market 20 years ago? An index of the US market would have returned 9.7% since 1991.
It gets even better, had you diversified into international funds and held 30% of your stocks in international indexes your returns since 1973 and 1991 would have been 13.5% and 11.7% respectively (global allocation and returns based on DFA Balanced Strategy).
These returns were simply a matter of buying and holding capital markets. No stock picking, market timing, sector allocation. No high paid gurus, quarterly meetings with your advisor and their crystal ball. Just investing in a simple allocation of global equities, re-balancing annually, and not touching anything.
This may not have the glamor of picking the next Google and getting rich overnight. But, I would argue that most investors wish that their overall return since 1991 was 11.7%.
20 years ago a friend of mine related a piece of advice his father gave him. His dad said: save regularly in the US total market index fund and don't worry until you approach retirement. His father was a successful broker for Merrill Lynch.
Some final thoughts from some pretty big minds in the investing world:
“The S&P 500 is a wonderful thing to put your money in. If somebody said, ‘I’ve got a fund here with a really low cost, that’s tax efficient, with a 15-to-20-year record of beating almost everybody,’ why wouldn’t you own it?” — Bill Miller, manager, Legg Mason Value Trust”
“Buying an index fund over a long period of time makes the most sense.” — Warren Buffett
“I can’t recall ever once having seen the name of a market timer on Forbes’ annual list of the richest people in the world. If it were truly possible to predict corrections, you’d think somebody would have made billions by doing it.” — Peter Lynch, former manager, Fidelity Magellan
“Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.” — Peter Lynch
