Financial Literacy

How to Beat the Average Investor Return

This week’s chart compares the annualized returns of various asset classes to that of the average investor.

As you can see, the 3.7% return earned by most investors is even lower than cash (Three-Month Treasury Bill). And it barely beats inflation.

Why the disparity between investors and sectors like Energy and Healthcare? The likely cause is that the majority of people are making the worst possible investing mistake: buying high and selling low.

The fact is, many of us can’t help reacting emotionally to geopolitical issuesexaggerated media storiespoor market sentiment

Fear can push you out of the markets at the most inopportune times. That’s an instinct you have to fight.

Investment U reader Jeff has the right idea. In response to an October piece on market volatility, he wrote, “I think that the best thing to do now, in the present market, is to do nothing and wait and see when the market stabilizes… after all, any losses you may have now are only paper losses.”

Since then, it’s worth noting, the S&P 500 is up more than 7%.

Or you can take it from Chief Investment Strategist Alexander Green: “It’s true that bad news makes good headlines. But it doesn’t provide a balanced perspective on the world…

“You have to counter the monotonous, daily drip of negative media reports with reminders that interest rates are at rock bottom, inflation is low and headed lower still, the real estate market is recovering, the dollar is strengthening, unemployment is falling, the U.S. economy is growing, U.S. corporate earnings are at an all-time record and so are profit margins.”

The best way to avoid selling low? Stay calmignore the mainstream media… and be sure to employ trailing stops or hard stops.

Editorial Note: Want to rise above mediocrity and beat the 3.7% return of the average investor? Then it’s time you start using the same advanced trading strategies as The Oxford Club’s experts. To see how they work, click here.


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