Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

Are You One of the Many Investors Wasting Your Time?

December 5, 2019 By Dick Young

By GoShiva @ Shutterstock.com

If there’s one thing investors do to waste a lot of their time, it is comparing the performance of their portfolios to the S&P 500 or the Dow Jones Industrial Average. These indexes have little in common with any well balanced and well diversified portfolio. They simply aren’t good proxies for conservative, retired or soon to be retired investors to use for their investments. In December 2004 I called the practice a big waste of time. I maintain that view today. I wrote then:

A Big Waste of Time

One of the most inane exercises carried out by professional and amateur investors alike is comparing performance against, for example, the S&P 500 or Dow 30. These things are moving targets. Investors are not comparing apples to apples. For example, the original Dow began in 1896 with 12 components. What are you comparing yourself against? American Cotton Oil or American Sugar Refining or perhaps Chicago Gas? No, all of these companies have long since disappeared from the Dow 30. In fact, only one of today’s Dow 30 companies started out in Charles Dow’s index back in 1896. The sole survivor is General Electric. The others have either gone bankrupt or merged and merged again. The Dow today is even 10% different from the Dow in 1999, as Eastman Kodak, AT&T, and International Paper have been replaced by AIG, Verizon, and Pfizer.

Both the Dow and the S&P 500 not only are moving targets, but are survivalist weighted. Losers and bankruptcies are dropped and replaced with up-and-comers. And neither index is encumbered with sales charges, expenses, or fees of any kind. And indices don’t pay taxes, which takes a giant bite out of most investors’ portfolios. No, you will do yourself no good comparing your own efforts or those of your manager’s against moving targets.

Instead, measure yourself against a set of reasonable goals based on long-term growth of the economy and normalized interest rates, both nominal and real. With a clear understanding of probable long-term growth and income characteristics, you are equipped to establish your own personal targets.

There are thousands of indexes available, including some with greater value as comparisons for investor portfolios. Those should be sought out and used in a way that takes into account all the factors I mentioned back in 2004. Don’t make the mistakes so many do by comparing your portfolio to an index that has nothing to do with your goals, risk tolerance, or desire for diversification.

Originally posted on Youngsworldmoneyforecast.com.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • It’s Time For Investors to Focus on Treasuries
  • Earnings Predictions Scare Investors
  • Investors Throw Caution to the Wind
  • Author
  • Recent Posts
Dick Young
Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.
Latest posts by Dick Young (see all)
  • PRICES SOAR: Diesel Shortage Could Cripple America’s Economy - May 13, 2022
  • Young’s Retirement Compounders Clearly Dominate! - April 26, 2022
  • The Magic of Compound Interest - April 5, 2022

Search Young Research

Most Popular

  • Even Without Food and Gas, Inflation is Soaring
  • Avoid This Serious Tax Mistake in Retirement
  • Could Car Dealers Get Flooded with Cars Mid-Recession?
  • Red States Churning Out Jobs While Blue States Lag Behind
  • Time to Save, Troubles Dining Out, and Intelligence on Yellowstone
  • Here’s Why You Need a 15-Year Retirement Investment Plan
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • Despite Inflation, Best Year Ever for Vacation Demand
  • The Power of a Compound Interest Table
  • “Talk to Me, Goose!” Time Flies in Top Gun: Maverick

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Dollar Strengthens as “Least Bad” Currency Today
  • Biden’s Economic Illiteracy and Shameless Demagoguery
  • “Shooter! Run!”
  • FOOD SHORTAGE: Drought in Italy Leaves Farmers High and Dry
  • BANKRUPTCY: Airline Restructures as Exhausted Pilots Demand Relief
  • BIDEN OUT OF TOUCH: Will America See Recession, or Worse?
  • Your Average Joe – a Man Out of Touch
  • “Talk to Me, Goose!” Time Flies in Top Gun: Maverick
  • The Dangers of Politicizing the Federal Reserve
  • FOOD SHORTAGE: Four Reasons Farms Are Suffering

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.