Investing Advice

Average Return on Investment

People tend to focus on a fund's historical average and therefore believe that this is the number they can expect every year. But hey, this is an AVERAGE. You get an average by combining some bigger numbers and some smaller numbers, some years better than the average and some worse than average years. This is how averages work.
Here are some interesting averages:
  • 10 years 1990 through 1999, the average stock fund gained 23.6% per year. $10,000 invested grew to $83,194

  • The S&P 500 gained an average 28%, and $10,000 invested grew to $118,074 in the same 10 years

Because of this, financial experts advise to just hang in there through the bad times, taking advantage of the drop in your fund's share price to buy more at bargain prices.

Jumping from one fund to another can be a big mistake. Sometimes the cure is worse than the disease. There's a real temptation to look at the latest list of top 10 funds and switch to the "winner".

In fact, the top 5 funds for the 10 years ending June 2000 had an average annual gain of 21.6%, but all had quarters where they pulled back sharply with a 25% or more loss for the quarter. Your fund may just be having one of these temporary bad-luck runs.

Other Stock Market Basics Topics:

  1. Mutual Fund Advantages
  2. History of Mutual Funds
  3. NAV
  4. Dollar Cost Averaging
  5. General advice about choosing a fund
  6. Mutual Fund Ratings
  7. Evaluating Mutual Fund Investment Risk
  8. Mutual Fund Share Classes
  9. Mutual Fund Fees
  10. The Mutual Fund Prospectus
  11. How important is the manager's length of experience?
  12. Why is the prospectus hard to understand?
  13. Mutual Fund Annual Report
  14. Comparing your fund to the competition
  15. Comparing funds on an after-tax basis
  16. Average Return on Investment
  17. How Not to Pick a Mutual Fund
  18. Cashing in Your Fund
  19. When to Sell Your Fund
  20. Mutual Funds and Asset Allocation
  21. When to get started with a mutual fund
  22. Types of Mutual Funds
  23. Value Stock Funds
  24. Growth Stock Funds
  25. Small and Micro-cap Stocks
  26. Mid Cap
  27. Large Cap Companies
  28. Income Stock Funds
  29. Mutual Fund Index
  30. Enhanced Index Funds
  31. Sector Mutual Funds
  32. Stock Market Sectors
  33. Defensive Stocks
  34. International Funds
  35. Real Estate Mutual Funds
  36. Socially Responsible Funds
  37. Balanced Funds
  38. Tax-Efficient Funds
  39. Bond Convertible Funds
  40. Junk Bond Funds
  41. Mixtures of stock types
  42. Closed End Funds
  43. Exchange Traded Funds (ETF’s)
  44. Stock Picking Strategy - Picking your own stocks?
  45. Fund names, and what they really invest in
  46. How to get started
  47. Where can I start investing with no money?

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