Average total returns in the stock and bond markets are often cited in financial circles, perhaps giving lay investors the false impression that these returns are the norm. In reality, there have been few years when either stocks or bonds delivered returns that are even close to market averages. Financial markets, particularly stocks, are inherently volatile over the short term. To benefit from long-term market performance, investors should temper their expectations and stay the course. What does this mean to me?
Temper your expectations. As rare as it is for either the stock or bond markets to deliver returns near their historical averages, it’s even more rare when both stocks and bonds have done so in the same calendar year. Investors should never expect the average return in any given year or even over intermediate time periods.
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