It seems like everyone is trying to beat the market these days. If the general market earns 8%, they want to earn 10%. If it reaps gains of 12%, then they want 15%. And they figure if they pick just the right stocks, they can earn beefy returns and retire with loads of cash at their disposal.
I guess it makes sense, right? If I was given the choice between 10% returns and 20% returns, then I’d choose 20%! I mean, why not? The only thing is, nobody has a clue how to do this. In fact, it’s been proven time and time again that monkeys can choose stocks better than the financial experts!
And you know what? A massive percentage of growth in your investments isn’t the main factor to riches anyway! Think I’m nuts? Read on and let me prove you wrong. I promise I won’t gloat too much when you start nodding in agreement.
Investing: It’s Not About The Percentage of Growth
My co-worker constantly struts around with his chest puffed out, talking about how he beats the market with his stock picks.
I was fairly impressed at first, especially when he told me that he earned 23% on his stock picks last year. Maybe I’d better start listening to what this guy’s talking about!
And then he kept talking…
He’s 34 years old and has only $6,800 invested in the market. He earned $1,600 last year.
Sure, that means he earned 23%, but over the course of the entire year he earned only $1,600 on his entire portfolio. This is like me gloating that I improved my vertical by 50% and failing to mention that I could only jump 1 inch before I started using those “tried-and-true” Strength shoes. Okay, yeah, they helped me improve by 50%, but that means I can still only jump an inch and a half.
The Real Path to Riches
There’s another guy at work (let’s call him Skip) that’s not nearly as vocal about his returns. In a typical year, he’ll earn between 8% and 10%. This means that his growth is less than half of the pompous jerk. But you know what? He earns way more than $1,600 a year…
Skip earned $20,000 on the growth of his investments last year, but his percentage of growth was only 10%, less than half of the “investment genius”.
How is this possible?
It’s simple really. Skip has made a point to live on less and pile his retirement accounts to $200,000. He then earned 10% and made $20,000 on the growth. That’s $18,400 more than the guy that earned 23%.
So what’s the key to investment riches?
Put. Money. In.
Don’t worry so much about what to invest in. Stop using the excuse that you don’t know anything about the market. Just get started and put some money in there! If you never get started, then you’ll ALWAYS earn nothing!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.