I apologize if this is a stupid question, but please enlighten me.
Suppose that you are interested in investing in a stock because you expect for the stock to appreciate in value. You feel confident that it will give you an annual gross return of 5%. Adjusted for an assumed 2% inflation, that's a 3% real return annually. However, if you had invested in a fund like the S&P 500, for example, you could have expected a higher real return during that time. If you assume a real return of 7% for the S&P 500, that's 4% worth of real return that you missed out on by investing in the first stock I mentioned instead of the S&P 500.
By that logic, is there a reason to invest in anything that you don't believe will beat the rate of return of a fund like the S&P 500 in the long run? What defines "long" in that situation? I assume that this situation doesn't apply in the short run, especially in times where certain stocks may be doing well while the overall market isn't.
Submitted February 18, 2018 at 01:19AM by indecisivefinance http://ift.tt/2ELD4RD
