Welcome to Ameritrade Plus University |
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Setting reasonable goals increases your odds for long-term success Nobody wants to risk big losses -- but everybody wants big profits. The key to successful investing is balancing risk against potential return. If you overreach, you could suffer a setback so crushing that you never fully recover. On the other hand, if you try to avoid all risk, you'll earn less than a fair return. What should you be aiming for? The first place to look for guidance is the long-term historical record. Including dividends, the S&P 500 has provided a median return since 1926 of about 12 percent a year. Over various five- and 10-year stretches, those returns generally average somewhere between 8 and 15 percent, at most. The 20 percent-plus annual gains of the later 1990's are very rare. To reach your goals, you don't necessarily have to beat the market all the time. If you earned even three-quarters of the S&P 500's gains, you're way ahead of the historical averages. What's more important is to avoid the risk of a disastrous loss. Individual investors can achieve that goal by putting together a diversified portfolio built around a large core of blue-chip growth stocks. Those are the shares of companies with sales and market capitalization of at least $5 billion, strong balance sheets and projected earnings and dividend growth that will support a total return averaging at least 12 percent a year. This website provides a list of 100 such stocks, along with key data.If you average at least 12 percent annually, you'll double your money every six years -- and multiply it 16-fold over the next 25 years. | ||
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