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Editor's note: It's Exchange-Traded Fund (ETF) Week here in DailyWealth. And we're sharing the top reasons why we love ETFs. Today's essay is all about long-term investing made easy. We explain how to use ETFs to set up...
The Simplest Long-Term Investment Strategy You'll Ever SeeBy
Friday, February 20, 2015
Is your goal as an investor to beat the market?
If your answer is yes, I have news for you...
Not every investor can beat the market. And in many cases, trying to beat the market can shatter your long-term gains...
The truth is, most investors don't come anywhere near beating the market. The chart below tells the story. It shows just how bad returns have been for the typical investor over the past two decades...
 While U.S. stocks increased 8.2% a year over this period, the average investor saw less than a third of those gains... just 2.3% a year. That's actually much worse than it seems over two decades of investing. After 20 years, a $10,000 investment at 8.2% turns into $48,367... a 384% return. The same investment at 2.3% a year turns into just $15,758... a 58% gain.
Said another way, the average investor earned just 15% of the long-term gain on stocks over this 20-year period.
There are plenty of reasons why the typical investor underperforms... High fees, lack of diversification, and trading in and out of the market at the worst possible times are culprits.
The last point is key... investors tend to buy into stocks at the top and sell at the bottom. It crushes their long-term returns.
ETFs can't solve that psychological barrier. But they do offer an easy way to make long-term investment decisions.
Whether you'd like to build a simple portfolio of 60% U.S. stocks and 40% bonds or a complex portfolio with a dozen asset classes, ETFs are a great tool.
You see, ETFs are easy to buy and sell. And more than 1,000 trade in the U.S. So you can invest in just about anything you'd like.
Take a look at the table below. It shows a mock long-term portfolio... And how you could build it in just a few minutes with just a few transactions fees using ETFs...
 Now, I'm NOT saying you should invest in this portfolio. Or that this is the right portfolio for you over the long term. But I will say that if you bought this portfolio today, and held for 20 years, you'd likely beat the average investor (who earns just 15% of the market's performance).
The great thing about ETFs is that they allow you to find the portfolio mix that's right for you. And they allow you to build that portfolio quickly and easily.
Good investing,
Steve
Further Reading:
You can find more of Steve's educational content about ETFs right here:
The Safest Way to Pocket Triple-Digit Gains
To make big profits, you DON'T have to take big risks... This Essay Could Literally Save You Millions of Dollars
Over a lifetime, these mutual funds could cost you millions... Access This Billion-Dollar Strategy With a Single Click
You could have turned $10,000 into more than $1.8 billion with this strategy... The Easiest Way to Turn "Big Picture" Ideas Into Profits
Getting the "big picture" right isn't enough if you choose the wrong investment... Market NotesTHE OFFENSE SECTOR IS SOARING Today's chart shows it's still boom times for "offense contractors."
In June 2013, we noted that the U.S. is involved in so many foreign wars that "defense contractors" should be called "offense contractors." We also noted that many folks were warning against investing in this industry... due to an expected reduction in government spending.
That spending reduction has not arrived. You can see this "non-arrival" by looking at the past two years' price action in the PowerShares Aerospace and Defense Fund (PPA). This investment fund is a "one click" way to own a diversified basket of offense contractors. These companies manufacture tanks, fighter jets, submarines, aircraft carriers, and various other things required to wage modern war.
As you can see below, PPA shares are up 20% since mid-October… and just set a new all-time high yesterday. The bull market in "offense contractors" is still on.
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