Basics in investing

There are many misconceptions in investing; whether in stocks or bonds or in building an investment portfolio in general. Carl Richards at Behavior Gap has an interesting article in getrichslowly.org

Many of the commonly-used approaches to financial planning take long-term average rates of return and then make the assumption that you will get that return every year. Say you build an investment portfolio that you think will have an average return of 8.5%. Just because the average is 8.5%, it should be obvious to anyone that has been alive the last 12 months that this does not mean we will get 8.5% every year.

While this may seem obvious, the implications are huge.

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