Investors are lulled into a complacency with the false knowledge they have acquired or may acquire “average” returns. They hear what securities have earned on average going back through the years and they then project these figures into the future.
To begin with, these long-term averages are wrong. Indexes on which they are based may be skewed. Many years ago, companies that failed may not have been included in the statistics used, so that the results were overly positive.
Secondly, there are steep investment experience hills and valleys. You may need the funds just when your portfolio is in a funk or has recently been in one, and hasn’t had time to average out.
So: Whenever you hear securities will bring you average returns, think again.
No comments:
Post a Comment