This question is on the minds of millions of Americans. I know exactly how to recover your losses: get out of the U.S. stock market and recoup your losses elsewhere.
S&P 500 loses 28% in one year
The sales pitch of securities salesman is that the stock market goes up around 8% or 9% per year over the long run – so don’t ever sell as a reaction to losing money. Let’s examine this, and assume your investment performance equaled the S&P 500 (even though the majority of mutual funds’ performance is inferior to that of the S&P 500).
Scenario A – You entered the market one year ago. You experience a 28% loss. For you to get back on track for 8% annual gains, you’ll need a 62% gain this next year. Or if you take two years to get back on track, you’ll need a 32% gain each year. How likely do you think this will be?
Scenario B – You entered the market exactly four years ago. Thus far you’ve had a 1.5% loss. If you goal was to earn 8% per year in the stock market and you started with $100,000… you’ve come up short $37,548 of the $136,048 target. That’s the would-be power of compound interest. Over this four year period of time you’ve ended up almost 30% short of your target.
Solution: Get most of your money out of the stock market. It is a speculative investment vehicle masquerading as a predictable investment vehicle. Now the mask came off… take a good look.
