The Stock Market

Stewart Ogilby

Corporate incomes, including advertising monies spent by Wall Street's huge brokerage firms, are gleaned in fees and charges from portfolios constructed by selling stocks, bonds and, largely, mutual funds to their customers.

An important fact can be found in a Kiplinger Magazine April 15, 2015 article written by Stephen Goldberg:

Thanks primarily to their rock-bottom costs, index funds have outperformed roughly two thirds of actively managed funds across all kinds of markets — and they'll almost surely continue to do so. What's more, picking the one-third of funds that will beat their indexes is extremely difficult; many argue that it is impossible.

If one remained fully invested, it took around five and a half years just to return to a break-even value following the 2008 "market adjustment". Financial experts refer to this as volatility risk.

When markets decline it is evidenced in corresponding index funds as in 2008. For persons in and near retirement the paper losses were very depressing. For retirees taking income from their portfolios the losses realized were devastating.

According to the 2016 Dalbar Report, the average investor in asset allocation mutual funds (those that "diversify" your money among a variety of asset classes) earned only 1.65% per year over the previous three decades! The report disclosed that the average investor in equity mutual funds averaged only 3.66% per year, beating inflation by only 1% per year after stressful volatility roller-coaster rides and sleepless nights.

The report concluded: The results consistently show that the average investor earns less — in many cases, much less — than mutual fund performance reports would suggest.

I consider it to be an important responsibility to provide information on ways to reduce portfolio risk. Safety, the protection of family assets, is primary today for the overwhelming majority of employed and retired Americans.

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