Debunking Investment Myths: What Doesn't Drive Returns
Nov 22, 2024As someone who invests in their future, you're likely eyeing what drives investment returns.
But it’s all-too-easy to be distracted by a number of investment myths. These are nothing but short-term noise that can cause you to miss the big picture of long-term gains.
And it’s no one’s fault. These investment myths are so widespread that even seasoned pros might swear by them.
To make smarter money moves, you need to separate fact from fiction and focus on what really matters.
So, let's clear the air.
Scroll down to learn 3 BIG INVESTMENT MYTHS that, despite popular belief, won’t likely drive your returns.
WITH SO MANY FACTORS IMPACTING INVESTMENT RETURNS, IT’S TOUGH TO TELL WHAT'S REAL.
WHILE OFTEN THOUGHT TO INFLUENCE THE MARKET, THE FOLLOWING 3 MYTHS HAVE, HISTORICALLY, LITTLE-TO-NO BEARING ON LONG-TERM RETURNS.
FACT: Investment returns and earnings reports have shown no correlation.
FACT: A geopolitical crisis can cause minor, short-term declines, but usually has no effect on the long-term market outlook.
FACT: Stock valuations almost always gravitate back toward their long-term averages.
FINANCIAL LESSON:
AVOID THE HYPE. PRACTICE THE FUNDAMENTALS. FOCUS ON THE LONG-TERM
If factors like earnings reports and geopolitical events don’t influence stock returns, then what does?
For long-term investors, fundamentals are still the bread and butter of valuing stocks. This includes earnings growth, dividends, and cash flows.
The market will always fluctuate based on recent news and events; however, understanding how much weight to give what you hear (or scroll through) can help you make decisions with a greater sense of confidence.
Terry Wheeler, J.D. CFP®
WE Alliance Wealth Advisors, Inc.
