January 10, 2023

How to Generate the Best Returns Over the Next Decade

If you want great returns over the long-term in your investment portfolio, the number one challenge you’re going to face is you.

That’s right. Your behaviours will drive 90% or more of the returns you will see in your portfolio over the short and long term.

One of my favourite sketches from Carl Richards is a simple bar graph. It includes two bars, the one on the left is a little higher than the other. The higher one is labelled “investment returns,” and the other is marked “investor returns” - The difference between them is the infamous “behaviour gap.”

You could invest in a simple index fund for the next ten years, and it may generate a 10% return over the decade. This would be the investment return.

The problem is that we as humans make rash decisions, charged full of emotion. We react to the market news or see a new sexy fund to invest in, or we just plain get bored of our current investment strategy.

We bounce around from investment strategy to investment strategy to maybe ultimately only get a 6% or 7% return over the same decade.

On that bar graph, this is the “investor returns.”

We can so often leave returns on the table because of our behaviour.

I’ll leave you with this. Investing and growing wealth is only 5-10% about the number or picking the best funds or asset allocation.

It’s 90-95% driven by behaviours. The more you can focus on this, the better off you will be long term.

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