Page 3 - SixMistakesSuccessfulWomenMake22
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Here’s an example of an opinion: “Investing for the long-term is a major key to the
success of your financial plan.” Please tell me how can you verify that statement?
W ell, for example, W Street professionals typically attempt to do so by
pulling out a beautiful chart that shows how between 1936-2015 the stock markets
actual rate of return was 10.40%.* Know this: Investing over the long-term is not
investing for YOUR long-term! I have yet to meet someone who said, “Hey T ony ,
my long-term investmen horizon i 79 years. However have me plenty of
peop who v anywhere between 15 and 30 y being long-term… that’s
long enough in the mind of the typical woman on the street.
Let’s consider the example of a 49-year-old woman who wants to retire at the age
of 65. If she starts in the year 2000 and continues to contribute funds for 16 years,
she will no doubt be looking for the magical 10% return the financial gurus
promised her. She has already accumulated $500,000 and diligently invests
$15,000 per year every year for 16 years. Using the same stock market index that
exhibited a 10.40% return on investment, our investor will only yield a 4.74%
return, and that’s before taxes and fees! It gets worse…
W all Street does not work for free; so let’s deduct a modest 1% fee for their
services. The rate of return is now 3.73%. So, a $500,000 starting balance with
$225,000 of additional investment ($15,000 per year for 16 years), is actually
worth $1,230,937.*
Our investor took 100% of the risk and invested 100% of the money in a situation
that was fraught with risk over which she had absolutely no control (the stock
market), only to earn 3.73% ROI. Oh, by the way, W all Street was paid without
putting up a dime or taking any risk. Something does not quite stack up here. It
doesn’t feel right! Trust your guidance system, your intuition.
*Source: Truth Concepts and Pinnacle Data Corporation. Assumes stocks mirror the Standard and Poor’s 500. The performance of an
index is not indicative of the performance of any particular investment. Individuals cannot invest directly in an index. Past perfor-
mance is no guarantee of future results
