Consider this: The S&P 500 Index (SPX) has averaged an 8.2 percent annual return since 1996. During that same time period, however, the average investor has earned an annual portfolio return of just 2.1 percent.1 So while a hypothetical $1 million portfolio that tracked the SPX exactly would be worth nearly five times more today ($4.8 million) than 20 years ago, the average investor’s portfolio has barely grown by half ($1.5 million) its original value.
Much of this underperformance could be due to behavioral tendencies that lead to poor decisions about finances and investing. Understanding these biases will help you avoid common pitfalls and remain on track for your long-term financial goals.
"People who are right most of the time are people who change their minds often."
—Jeff Bezos, CEO and founder of Amazon.com
1 "Investing and Emotions," 2016, BlackRock
2 "MAJORITY OF AMERICANS HAVE MISPERCEPTIONS OF STOCK MARKET PERFORMANCE," Sept. 24, 2012, Franklin Templeton Investments
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