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Adjust Your Expectations

Ask 100 people if they are better drivers than average.

Now ask 100 people if they are better looking than average.

The majority of the time you will hear yes to these questions. But the problem is… it’s impossible that over half the people are better than average.

This self serving bias reaches into the investing world. Folks tend to talk more about their winners than losers. And this tendency, paired with wild advertising claims, skews reality.

Both new and experienced investors get pulled into ridiculous advertising claims such as… “Over 200% in 2 months!” and “Our Stock Picks Double in Value in a Week!”… These claims can’t be consistently upheld and the risk often outweighs the rare, big wins.

So now it’s time you get the facts straight. It will help you see through the crazy investor stories at cocktail parties and avoid absurd advertising claims.

To start, let’s look at how a few of the world’s best investors have performed…

George Soros – Quantum Fund averaged about 30% annually while Soros managed it.
Warren Buffet
– Berkshire Hathaway averaged just under 20% annually from 1965 – 2014.
Paul Tudor Jones – Tudor Investment Corporation returned 19% annually from 1980-2015.

Now compare these returns to the S&P 500 which has returned close to 8% annually. The world’s best investors only do better by small amounts… Not hundreds or thousands of percent better.

Smart investors know small wins can amount to millions of dollars more over time.

If you beat the S&P 500 on average by a few percent each year you should be ecstatic. You can learn the massive impact small wins have in our training center article “Compound Interest – The Secret to Investing.”

The first step to great investing is bringing your expectations back to Earth. Look past the big win stories and ridiculous advertising claims. Consistently beating the market by a few percent will make you very wealthy.

 

Published in Training Center