Historically, the US Equity market has returned about 10% annually to investors from 1926 – 2022. Due to this historical rate of return, many investors expect this level of return year over year. However, stock markets are highly volatile. Although the average is 10% per year, it is extremely rare for the market to be up 10% over any given year.

Since 1927, there have only been 6 years where the stock market returned between 8-12%. Thus, even though you should expect the market to give you a 10% return, you should expect the market over any given year to hardly ever give you a 10% return. It is this bumpy road that creates the risk in investing in equities, which is why you are compensated with the 10% annual average return. The key is to take the long view and not look at quarter-to-quarter or year-to-year returns.

People often panic when their expectations don’t match reality. Investors expect a 10% return every year, which will often not materialize. When the market goes down and does not match this 10% expectation, investors tend to panic. Changing your expectations on the range of outcomes of equities while keeping in mind the long-term average can help investors stick to their plan.

Hill Investment Group is a registered investment adviser. Registration of an Investment Advisor does not imply any level of skill or training.  This information is educational and does not intend to make an offer for the sale of any specific securities, investments, or strategies.  Investments involve risk, and past performance is not indicative of future performance. Return will be reduced by advisory fees and any other expenses incurred in managing a client’s account. Consult with a qualified financial adviser before implementing any investment strategy.

Hill Investment Group may discuss and display charts, graphs, and formulas which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used alone to make investment decisions.

At conferences, I often hear experts advocate for private and alternative investments, claiming they’re essential for our largest and most sophisticated clients. They argue that these exclusive opportunities are what the wealthy truly want. These voices are growing louder, and the products they pitch are becoming more prevalent.

At Hill Investment Group, we take a different approach. We continue to value simplicity and transparency, regardless of how much money our clients have. We avoid complex, illiquid, and expensive options, even when others say they’re necessary. Our guiding question is this: once the marginal utility of wealth kicks in—when each additional dollar has less impact on your life—why take on added risks?

You can achieve extraordinary success by embracing what we call a “passive-aggressive” approach:

• Own global capitalism: Invest in broad market ETFs.
• Tilt toward premiums: Focus on factors identified by research to enhance returns.
• Rebalance regularly: Sell what’s done well, buy what’s lagged.
• Tax loss harvest: Capture losses to offset gains.
• Let it compound: Give your investments time to grow.
• Keep investing: Stay committed over the long term.
• Ignore the noise: Focus on your strategy, not the headlines.

By sticking to these principles, you can build and preserve wealth without getting caught up in the complexities that others might push.

Keep it simple!

WSJ columnist Jason Zweig elegantly analyzes and answers a current phenomenon: “It’s a stock picker’s market. So why aren’t more stock pickers doing better?”

Would you consider your own portfolio “diversified” if only three stocks accounted for more than 20% of the value of the portfolio? You might be excited at a cocktail party, but how well would you sleep if only one stock (Nvidia) accounted for more than 30% of the year-to-date return of the S&P 500?

Read on to learn more about how correlation and concentration are confounding stockpickers while following an evidence-based, long-view approach ignores the noise and chugs along.

Hill Investment Group is a registered investment adviser. Registration of an Investment Advisor does not imply any level of skill or training.  This information is educational and does not intend to make an offer for the sale of any specific securities, investments, or strategies.  Investments involve risk and, past performance is not indicative of future performance. Return will be reduced by advisory fees and any other expenses incurred in the management of a client’s account. Consult with a qualified financial adviser before implementing any investment strategy.