5.5% Return: Look, the last decade was awful for stocks because you essentially started with the DotCom stratospheric levels in 2000 and ended up on the upslope of a recovery in the “Great Recession”. My returns on my retirement funds only went up when I become more actively engaged based on valuation levels and sectors. There were some areas where you could have made a killing in the last 10 years including energy, international, and healthcare. All of these were tied to large forces that shouldn’t have been much of a surprise.

Once you have enough money, I really feel that you have to spend the time and understand companies and make educated investment choices. Other than that, get the lowest cost index funds, invest in sectors that you think will do and follow Trents (and my) advice about living cheaply.

Remember when everyone was collecting Beanie Babies? They were going to be worth thousands someday. Now you can find them on eBay for $1 or $2 a piece.

Even a stock that increases in price only makes you a profit if you sell it while it’s at a higher price than you paid. A gain is only a gain when it’s realized.

Investments should be things you’re not emotionally attached to (and this includes real estate. It’s not going to make money for you unless you’re willing to sell it while it’s high).

There are very big potential downsides to buying Things that you think you can sell later on to make money. Just one is that the more Things you have, the more space you need, and space costs money.

There is never a downside to just putting money away. Money is money is money, and with a very small amount of common sense you can ensure that at the very least your money maintains its value (i.e. doesn’t get nibbled away by inflation).

So… saving early and saving often is more important for the first decade than the returns you get from the investment.

But if I had put an additional $5,000 each of the last 10 years and uses the techniques like dollar cost averaging, rebalancing and diversification… It would be worth a lot more money today… $75,000 or $100,000 or $150,000?

Following what you describe above would have enabled me to have that kind of money instead of $27,000… People focus too much on the rate of appreciation (and they should), but initially the feed into the market is more important than the yield it returns!

Where were you 10 years ago :)

I figured out the 5.5% figure a few months ago as part of “The Money or Your Life” assessment. I’ve had more of a buy- and-hold strategy with individual stocks and some mutual funds that have performed okay. I noted that even my index funds haven’t held up that well over the long haul. One of them shows a negative return over the decade.

Trent’s point is a good one in that you should save as much as you can for retirement which will buffer you in case of returns less than planned.

Sourcing this increase in savings could come from anywhere, and though I hate to admit it, David Bach’s style of automatic payments before you see it is probably the best way to go, rather than Trent’s thought of trying to snowflake your way into saving more.

I EXPECT my investments to return more than I put in. Investments requiring hope is called gambling. Collecting baseball cards is a hobby, selling cards for profit is a business – neither would be considered investing.