Financial Planning Fridays #90: Your Lifetime Return

We send our clients an email on their birthdays with their updated lifetime return that shows the return of the S&P 500 since the day they were born. This return did not require any research, trading, or effort. It simply is the return that anyone who made an investment the day they were born received if they then took no further action.

However, most Americans don’t actually receive anywhere near their own lifetime returns. Why not? It’s because of the one thing in investing that we do have complete control over- our behavior.

Let’s look at a real-life example together- the lifetime return of the S&P 500 for an American that just turned 65 years old has been about 10% per year- consequently a $1,000 investment the day they were born is now worth more than $560,000.

Those same stocks have also had 9 massive sales of more than 25% during their 65-year lifetime. Although it felt very uncertain in the moment, every single one of these sales turned out to be an enormous opportunity for investors to increase their returns by buying more stock.

You probably know what happened instead- the average 65-year-old did not sit on their hands – they sold their stock during one of these big sales or they switched into a separate group of stocks that was outperforming at some point only to underperform for years afterwards. Others chose to hold bonds, or cash, or gold, instead despite the mountain of evidence that these would not give them the long-term return of stocks.

We have found that the only reliable way to help our clients get closer to the lifetime return they deserve, the return that will help them to reach all of the goals they set, is to use a disciplined investment strategy and allocation that they understand and feel comfortable with and then do everything we can to help them stick to it for the long-term, especially during times of uncertainty. This is the key to achieving a better lifetime return.

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.