October 18, 2013

What is the #1 factor in determining your return on investment (besides your level of financial education)?

5 thoughts on “October 18, 2013”

  1. Alex Christianson says:

    The costs.

  2. Mike Finley says:

    Not quite, Alex. Try again.

  3. Alex Christianson says:

    The amount of time an appreciating asset is left alone(not taken from).

  4. Mike Finley says:

    You are getting closer, but still not there.

  5. Mike Finley says:

    The answer is the asset allocation of your portfolio. How much you have in stocks, bonds, real estate, cash, etc. This one factor by far outweighs everything else when looking at how past returns turned out. So what does this mean?

    Focus on identifying the right asset allocation that fits your personal goals, time horizon, risk tolerance and tax situation. Let’s say you decide a 60/40 allocation is right for you (60% in stocks/40% in bonds and cash). That allocation has produced an 8.7% annual return over the last 87 years (not included 2013). This is before costs. Focusing on those boring and efficient no-load index mutual funds will garner you a return somewhere around 8.5 to 8.6% per year on average. Knowledge is POWER!!!!!!

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