Relax. Being “Average” Is Ok. Not.
Gerri Willis of CNN writes:
This past Thursday was the second worst day of the year for the Dow Jones Industrial Average. But remember, it was just a week ago today that the Dow closed above 14,000 for the first (and only) time. Fluctuations in the market shouldn’t get to the 401(k) investor. Keep in mind your time horizon - most of us are going to be invested in the market until we retire, often decades from now. On average, stocks move higher - their long term average gain is 10.8 percent each year, according to Hugh Johnson of Johnson Illington Advisors.
Question one: does everyone ONLY want 10.8%?
Question two: does this writer think a return of more than 10.8% a year is even possible?
Before you fall in love with 10% a year, take a look at what compounding does to “other” returns (i.e. 12%, 14%, etc.).
