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Do you have any tips to
help me manage my investing?
You've identified some
financial goals and begun to look at potential investments. You're
on the path to investment success!
Putting some plans into
motion is an essential step, but it's important to make sure you're investing
with the right mindset. Harboring unrealistic expectations based on what
other investors seem to
be doing can throw off even the best laid financial plan. This article
examines some popular
misconceptions about investing, accompanied by suggestions for investing
with the proper perspective.
Using history as a guide:
During the 1990s, it was
hard to ignore the stories of overnight stock market millionaires. For
a while it seemed that the stock market was a guaranteed way to get rich.
Some investors even began
to expect their investments to double in value in a matter of months.
But as many of those investors
learned in 2000, stock market declines are inevitable and can
wipe out easily made gains.
The Standard & Poor's
(S&P) 500 index a useful representation for the U.S. stock market
has averaged a 12% annual return since the 1920s. But 12% is a deceptive
number because it's only
an average. And, in fact, the history of the stock market is littered
with dramatic boom and bust cycles.
Some years, the S&P
500 may gain as much as 37.5%, as it did in 1981. Other years, like
2000, it may lose 9%. It is only when you average the indexes returns
over many years that you
arrive at a 12% return. The more extreme years have occasionally fueled
investor perception that
the market will always go up or that it will stay down forever.
As a long-term investor
who is focusing on a specific goal, you need to get too worked up
about one year's performance. Instead, keep your eye on your chosen benchmark.
What is an annuity?
What
is a CD?
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