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Be More Aggressive
Manage episode 374941367 series 2910154
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This week, Matt Robison and I discuss the concept of being aggressive in your investment strategy, especially when you have time on your side.
Over a 40-year period, historical data shows that investing $10,000 in the U.S. stock market could grow to an impressive $650,000, assuming an average annual return of 11%. Even in the worst-case scenario over the past century, where returns were just under 9%, that $10,000 investment would still grow to a substantial $300,000.
In contrast, conservative investments like bonds would only see your initial $10k grow to around $50k over the same time frame. This stark contrast illustrates the potential rewards of being more aggressive with your investments.
But, what about Target Date Funds?
Many people rely on target date funds to simplify their investment decisions. These funds automatically adjust your asset allocation based on your expected retirement date. While target date funds are a solid starting point, they tend to include up to 10% bond allocations even when you have decades until retirement.
But, what if the stock market tanks?
One of the main reasons people shy away from aggressive investing is loss aversion, a psychological bias that makes us fear losses more than we desire gains. It's a natural instinct, but it can hinder your financial progress if you're overly cautious.
To overcome this bias, it's essential to evaluate your investments rationally. Consider the worst-case scenario when it came to that $10k investment discussed earlier. Even at the lowest returns, it is still almost 83% more than the return on bonds.
In summary, being aggressive with your long-term investments can significantly enhance your financial success. While caution has its place, don't let fear hold you back from embracing an aggressive investment strategy. Consider your long-term goals, evaluate your risk tolerance, and explore opportunities for higher returns. With the right approach, you can harness the power of aggressive investing to secure a brighter financial future.
Are you ready to create your ideal lifestyle? Let’s Connect.
Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/
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