{"id":10935,"date":"2016-09-30T11:51:41","date_gmt":"2016-09-30T18:51:41","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=10935"},"modified":"2016-12-20T13:41:46","modified_gmt":"2016-12-20T21:41:46","slug":"how-much-money-stocks-can-make","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/how-much-money-stocks-can-make\/","title":{"rendered":"How Much Money Stocks Can Make You"},"content":{"rendered":"

Everyone wants to make a killing in stocks, but nobody wants to take any risk. That’s the basic conflict at the heart of any investment process.<\/p>\n

How much money stocks can make you in the real world is a known fact. If you consider one big firm’s forecast, however, the answer might shock you. Natixis, a global asset manager, believes that while investors expect 8.5% annually from stocks, their advisors believe<\/a> 5.9% is more likely.<\/p>\n

This pattern repeats around the world, to varying degrees. Most investors think they’ll make close to 10%, while their advisors see a number close to half that.<\/p>\n

The difference is important. A $10,000 investment that earns 8.5% in three decades turns into $115,583. If the advisors are right, the number you get is just $55,831 \u2014 nearly 52% less money!<\/p>\n

\"much<\/p>\n

The usual investor response to a lower return is to increase risk. No pain, no gain, right? Frustrated investors tell themselves that it’s all about being patient. But a string of low-return years can lead to trouble.<\/p>\n

First it’s market timing \u2014 trying to get in or out of the market<\/a> based on earnings, headlines or a\u00a0hunch. Then stock picking, trying to isolate the winners from the losers among thousands of choices.<\/p>\n

Too often, stock picking just ups the pressure. Concentrating your money into a small number of stocks leads to obsessive market following and ever more distracting information. Emotions take over.<\/p>\n

It’s for that reason that the “average investor” earned just 2.1% over the 20 years from 1996 to 2015, according to J.P. Morgan<\/a>. Comparatively, the stock market index by itself returned 8.2%.<\/p>\n

You might conclude\u00a0from reading the above that investors aren’t wrong to expect 8% or more from their portfolios, given what the S&P 500 has done in the last 20 years.<\/p>\n

Yet most people don’t invest in the S&P 500. Often they fear the volatility that comes from being 100% in stocks and instead own a mix of stocks and bonds.<\/p>\n

How much money can stocks make?<\/h2>\n

Yet even a 60\/40 mix of stocks and bonds returned 7.2% over the same period. Where do advisors come up with a number below 6%?<\/p>\n

One explanation is that advisors think that stocks and bonds will return less in future years than they have in the past. They don’t know this, but it’s a currently popular sentiment among professional investment managers.<\/p>\n

Another less charitable explanation is that the difference between 5.9% and 8.5% is mostly explained by advisors’ fees<\/a>. Since many advisors charge their clients 2% or more for their advice and the work of underlying fund managers, it’s not surprising math.<\/p>\n

How much money stocks can make is undisputed. How much money you leave in the hands of managers is the question mark. A portfolio of low-cost index funds<\/a>, well managed by software, removes that question mark and creates\u00a0a much clearer picture of how your money will grow.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Everyone wants to make a killing in stocks, but nobody wants to take any risk. That’s the basic conflict at the heart of any investment process. How much money stocks … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":10937,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[3],"tags":[62,43],"yoast_head":"\nHow Much Money Stocks Can Make You | MarketRiders<\/title>\n<meta name=\"description\" content=\"But how much money can stocks make you in the real world? 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