Over the past 5 years, the U.S. stock market has been
much like a tide, experiencing
ebbs and flows.
The myth of the success of the average investor - how can
investments do so well and the average investor do so relatively
The reality is that investors buy high and sell low. While
the S&P 500 Index has grown at an 11.8% annual rate, the
returns earned by the average equity fund investor since 1986
have averaged just 4.3% per year.
Conclusion: Most investors just chase the hottest
stocks or mutual funds rather than developing a sound long-term
investment plan. A strategic, personalized investment plan
based upon your particular circumstances and tolerance for
investment risk, combined with the ongoing counsel of an Investment
Advisor like Trident, can help you stay on course and navigate
through volatile markets.
As the chart below indicates, security selection determines
only a small portion (4.6%) of investment performance. What
really matters is the proper allocation of assets across stocks,
bonds and cash. Asset allocation is the critical element of
any successful investment plan.
UBS asset allocation study
Bottom Line: According to this
study, asset allocationAmericas
most admired, but least practiced investment disciplineaccounts
for 91.5% of the variation in portfolio returns.
Conclusion: Strategic asset allocation can help manage
portfolio risk while stabilizing returns.