My Positive Average Return Lost Me Money
Average returns can be referred to by financial institutions as a way to advertise their services. Yet, a positive average return doesn't mean you made money.
In this week's episode of Mike on Money, Mike explains how a positive average return can lose you money.
______________________
To schedule a conversation with Mike, go to talktomike.com, or call 512 265 5000
******
To learn more, go to iwanttoretirewell.com
______________________
00:00:00:00 - 00:00:27:08
Mike
Hi again, everyone. It's Mike. On money today we're talking about the secret of successful investing. And we've got a fun little example here to help you better understand what that secret is. Let's imagine that you either win lottery and you win $2 million tax free, or maybe you inherit $2 million from a from a rich uncle you didn't know you had.
00:00:27:16 - 00:00:45:16
Mike
But either way, suddenly you get $2 million and you decide you're going to invest it. Now, here's the thing you're thinking to yourself, man, there's this one stock I've been dying to buy. I know it's going to be a winner. That's I want to put my money there. But you don't really want to put all 2 million on one stock.
00:00:45:16 - 00:01:05:10
Mike
I mean, what if it goes belly up or something? I'll put half of the money in some kind of a diversified fund, and the other half I'll put in that stock I want to buy the first year. Here's what happens. Right? You put the money in the fund and here we have it on the screen. The fund that you pick, the diversified fund, it's up 30%.