By: Laura Walton AFC®
As I have begun teaching investments again, I am really struck by the reaction of our classes to the following series of charts.
These charts simply relate the risk of the stock market to the time period they were held.
Comments, thoughts and conclusions.
- If this is the only thing people knew about the stock market, their expectations to holding longer for best results would be the norm.
- Stocks are risky, but much less so if you leave them alone. ( assumptions are a diversified, low-cost index fund)
- Most financial advisors are incented to do the opposite of what this so clearly shows.
- It reminds me of fitness and nutrition data. Everyone knows that eating healthy and in moderation with a regular exercise program gives the best results (although no guarantees) over time. Yet, most people are always trying to achieve best results in another shorter-term way causing worse results, more costs and more stress. Why fight the obvious?