The perfect MP3 player

Dave Smith DavidSmith at byu.net
Mon Sep 19 13:58:34 MDT 2005


> Grant Robinson wrote:
> Annual growthadviser is a big assumption.  How do you do that?  Over the
> past five years, I've lost a little money in retirement investments and
> gained nothing substantial.  My savings accounts and CDs have done
> better!  I even got help from a financial advisor.

Your financial advisor should be the first to tell you that mutual funds
are a long term investment. In 5 years, it is just as likely that you will
loose money as you will make it. Consider the long term: Given any 30 year
period, the S&P 500 index has averaged at least 10% annually.

For example, the value of the S&P 500 on June 1, 1995 was $533.49. 30
years earlier, on June 1, 1965, the value was $88.72. That's a 500% return
over 30 years. Divide that by 30 to get the average annual return: 16.7%.
This is pretty normal.

Take a few more examples,

For today:
   September 16, 2005: $1237.91
   September 16, 1975: $  89.37
   Annual average return: 42.8% Yowza!

Even in 2001:adviser
   June 1, 2001: $1260.67
   June 1, 1971: $ 100.20
   Annual average return: 38.6%

If my numbers are mistaken, please advise.

Ask your financial advisor about those numbers. Your CDs can often do
better in the short term, but in the long term, they won't beat mutual
funds.

Oh, and for the other poster who thinks that savvy investors can "beat the
market," think again. The stock market is perhaps the only "real" market
in the world, where information is disseminated so quickly that no one can
"beat" it. If anyone could really beat the market, they would p0wn it. For
me, I just setup my mutual funds to automatically draft some money each
month from my checking account. I hardly ever look at them.

--Dave





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