Retirement mistake no. 1: Overconfidence in your investing skills
Sep 5th 2009 11:00AM
Updated Dec 4th 2009 3:12PM
Retirement mistake #1 is being overconfident in your investing skills.
This is a big one, and it applies particularly to men.
The traditional "hunters" believe they are much better investors than the data indicates is accurate.
Ask almost any man how he has done investing in the stock market over the years. The answers you will get will most likely range from 8 percent to 20 percent (or more!).
Here's the reality. Every year, Dalbar Inc., a respected independent market research firm, publishes a study titled "Quantitative Analysis of Investor Behavior." The study measures the actual performance of stock and bond investors and compares that performance to various benchmarks.
The latest study found that, while the S&P 500 returned 8.35 percent over a 20-year period ending in 2008, the average equity investor earned a pathetic 1.87 percent, which was less than the inflation rate of 2.89 percent. Bond investors fared worse. They earned returns of 0.77 percent compared to 7.43 percent for the index.
If you are relying on your investing skill to fund your retirement, you should be worried. Very worried.
See all ten of the biggest money mistakes a retiree can make.
Dan Solin is the author of the newly published book, The Smartest Retirement Book You'll Ever Read (Perigee Books 2009). His prior books include the New York Times bestsellers, The Smartest Investment Book You'll Ever Read and The Smartest 401(k) Book You'll Ever Read. See SmartestInvestmentBook.com. Read more about Dan Solin.