With the markets at all time highs, it is easy to dismiss 15-20% returns year to date from the indexes and look for even higher returns. After all, we are human. Nothing is enough. But the market has its seasonal swings and it is fully possible that come September, the market may run out of steam. And then, there is the search for sectors that do well, performing better than the others.  We could go from steel, copper, and oil, back to tech, and back now perhaps to financials.

The search never ends, if the desire is to get increasingly better returns that the market delivers. It is very puzzling how we don’t accept rock bottom bank interest rates and park money in those savings accounts but yet, bemoan the underperformance of our portfolio relative to the index that is generating returns that could secure our retirement if invested judiciously.

Future Wealth’s View

In a classic book written by Benjamin Graham titled the “Intelligent Investor”, Graham theorizes that investors find the stock market so seductive that our brains are hardwired to get us into investing trouble. Even when we fully understand that events and patterns are unpredictable, when they repeat two or three times in a row, regions of the human brain automatically anticipate that it will happen again. If it does happen, dopamine is released and the euphoria continues.

With a history of returns from the stock market that runs between 5-10% annually, it is easy to get lulled into the thought that 15-20%  annual returns should become the norm. But, that is unlikely to occur and it would be wise for all our readers to begin to accept the fact that >10% annual returns are extraordinarily good returns which are unlikely to be repeated year over year. Absent that realization, the cold harsh reality of long term single digit returns could prompt rash moves that may result in a serious loss in wealth.