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Most investors expect to get double digit returns on their
portfolios. The more relevant question is how much buying power (after
inflation) the market returns. While the market increases by about an
average of 4.5% annually in REAL terms, investors give away the vast
majority of those returns.
Point 1: Get Real...as in Real Returns
There is a natural belief that a professional investor
working harder and smarter than the rest can earn a greater return that
justifies the high fees and tax inefficiency. While some professionals have
beaten the market over several years, they number fewer than random
variation (otherwise known as luck) would have predicted.
There is also the belief that an individual investor (representing only
about 10% of the market) has an advantage over institutional investors in
selecting winning stocks and funds. In spite of stories we have all heard,
the data shows overwhelmingly that the opposite is true.
The investor is better served by capturing as much return as capitalism has
to give.
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