Just ask any mutual fund manager.
Quite frankly, few investors, professionals or otherwise, beat the market on a regular basis. Taxes and fees make beating the market an uphill struggle.
Over the last few months, I’ve been surveying millionaire investors as part of a new book project. What I’m discovering is that many millionaire investors don’t believe it’s possible to beat the market on a consistent basis.
That belief, however, did not hold these investors back from becoming successful.
That individuals with seven-figure investment portfolios don’t believe it is possible to beat the market should provide solace for the rest of us mortals slugging it out every day on Wall Street.
Indeed, knowing that you don’t have to be the next Peter Lynch to be a successful investor should take a lot of the pressure off your investment program.
I would go as far as saying that beating the market should not even be the goal of a new investor. Why? Because setting such a lofty goal only sets a new investor up for failure. And failure often leads to abandoning an investment program.
I believe beating your passbook savings account or certificate of deposit is a more relevant goal for someone starting an investment program. After all, for many investors, the investment choice is either stocks or their bank.
If you want to measure your investment program against something other than the overall market, here are a few things that successful investors should benchmark:
- Am I investing every month, regardless of the size of the investment?
- Have I maxed out my 401(k) program?
- Am I holding my transaction costs to less than 0.50% of my assets per year?
- Am I limiting my tax bite by holding investments at least 12 months?
- Am I reinvesting dividends?