Being Average Doesn’t Mean You Suck
Posted by Cap in Personal Finance on February 28, 2007 |That is, getting an average return from your retirement investment.
As I’ve been reading and trying to learn more about investing, I notice a particular thing — people are obessed with beating the market. To be sure, I would love it too if my retirement account outperforms the market ten-fold; but at the end, I wouldn’t care even if its returns are below average.
What’s important to me is that the investment has reached my goal and can provide me with a comfortable living during my retirement.
I can’t recall where I read this from, but it goes something like this:
When it comes to investing for your retirement, you shouldn’t care too much about beating the market. No one has “Beat the S&P 500 by 22%!” on their tombstone. When a group of retirees in a wealthy retirement community were asked that if they have had better return than the market, the result was mixed. Some said yes, some said no, but what most ended up saying was: “it doesn’t really matter what the returns were, because it was enough to get me here.”
7 Responses to “Being Average Doesn’t Mean You Suck”
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February 28th, 2007 at 4:42 pm
“it doesn’t really matter what the returns were, because it was enough to get me here.”
After all… isnt that what really matters..
March 1st, 2007 at 7:05 am
One of the biggest problems with investing, is when people don’t understand what average returns means.
Your post is absolutely right. One of the reasons everyone’s reaction is mixed is because that is the definition of average.
Some are going to better than the market, some are going to be worse. The only ones who are really going to make it, are those happy with average.
March 3rd, 2007 at 1:19 am
That is a very healthy attitude. Fortunately, you can practically assure yourself of average market returns. You can do that by not trying to beat the market, but rather invest in a wide enough index fund that tries to track the market one for one for example, Vanguard’s Total Market Index Fund (VTSMX)
March 8th, 2007 at 9:21 am
so true, so true! I personally don’t care either, although I’d like my accounts to do as good as the market, that’s purely psychological on my part.
I’d like to see an average of 8% through the years, but so would everyone else.
I just try to have the right asset allocation, check in to make sure the funds are being managed ok (I hadn’t done that until just last year and got some ugly news), and then go from there to continue to stay on course and continue to put money aside.
I read somewhere someone commented that if you are only happy with getting what the market gets, it’s like getting a “C”. I couldn’t disagree more with that comment.
March 11th, 2007 at 6:41 pm
i would like to start investing but, have NO idea where to start. i skimmed thru a book that kept mentioning 10% annual return, etc…
i couldn’t understand what exactly that meant.
:(
March 23rd, 2007 at 7:24 am
Tanyetta, go to Vanguard.com, and click around to open a Roth IRA. Put your money into the Vanguard Total Investment Fund, and leave it there. A 10% annual return means that the interest on your account in a year is worth 10% of your principle (how much you initially had invested). So if you initially had $100 invested and earn a 10% return, by the end of the year, you’ll have $110. Google and ye shall find.
I think there’s a general feeling among investors that they should do everything they can to get as much interest as possible. Yes, money isn’t everything, but that still means you should try to use it as efficently as possible. If you invest it, you want to invest it as well as possible. I don’t think there’s any strategy that will allow one to consistently “beat the street”, but the appeal of their being one thrills investors. The long term difference of an investment averaging 10% vs. %15 over 40 years is tremendous.