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How Satisified Have You Been with Your Stock Market Returns?

Posted on the 20 April 2013 by Mdelp


This is a list of the highest grossing films for each of the past 30 years.

Ask yourself, how many of these movies have you seen more than once?

1983. Return of the Jedi

1984. Indiana Jones and the Temple of Doom

1985. Back to the Future

1986. Top Gun

1987. Fatal Attraction

1988. Rain Man

1989. Indiana Jones and the Last Crusade

1990. Ghost

1991. Terminator 2: Judgment Day

1992. Aladdin

1993. Jurassic Park

1994. The Lion King

1995. Die Hard with a Vengeance

1996. Independence Day

1997. Titanic

1998. Armageddon

1999. Star Wars Episode I: Phantom Menace

2000. Mission Impossible II

2001. Harry Potter and the Sorcerer’s Stone

2002. Lord of the Rings: The Two Towers

2003. Lord of the Rings: The Return of the King

2004. Shrek 2

2005. Harry Potter and the Goblet of Fire

2006. Pirates of the Caribbean: Dead Man’s Chest

2007. Pirates of the Caribbean: At World’s End

2008. The Dark Knight

2009. Avatar

2010. Toy Story 3

2011. Harry Potter and the Deathly Hallows – Part 2

2012. The Avengers

2013. Oz the Great and Powerful

One reason we enjoy watching movies we’ve already seen before is psychologist have found we are happiest when what we expect will happen, actually happens.

Companies came to this conclusion as well and started using signs like these to make waiting in line less stressful. 

how satisified have you been with your stock market returns?

But what about when there are multiple options such as freeway lanes or grocery store checkout lanes?

how satisified have you been with your stock market returns?

The competitor in me comes out whenever I’m stuck in traffic and have to make a choice concerning which freeway lane to be in. Once I made my decision I’ll find a car or truck in the lane I was in “race” it to my off-ramp.  

Which brings me to investing and driving…

In my commute between home and work I, have two main options (freeway or side streets) plus several smaller streets and off ramp variations of these routes.

My experience driving each of these routes during various traffic and weather conditions has led me to expect a very narrow range of total commute times with the side streets option (from 20 minutes on the short side to almost 30 minutes on the long side) vs. a much wider range of times with the freeway route (from 15 minutes on the short side to one trip taking me almost an hour).

Going back to being happiest when what we expect will happen actually happens, I’m rarely disappointed when I take side streets because my actual experience and what I expected would happen almost always match up. Unlike taking the freeway which can be fantastic or frustrating based upon conditions outside my control.

I’m sure thats why bond buyers seem to be more satisfied with their holdings and don’t trade as much vs. stock buyers.

The chart below shows the monthly year-over-year percentage change in Bank of America Merrill Lynch AA Corporate Bond Index (high quality bonds) and monthly year-over-year percentage change in the S&P 500 Index over the past 15 years.

FRED Graph

The wide range of stock market returns from high highs to low lows makes it difficult to reliably have experiences that line up with your expectations.

Of the 180 data points in this chart, the bond index had 19 negative year-over-year time frames with the an average decline of 2.2% while the stock market had 53 negative year-over-year time frames with an average decline of 18.9%

How many different routes are there from your house to your work?

Do you drive the same path all the time or do you vary based upon traffic, time of day, rain, etc.?

When it comes to investing, how many different paths such as stocks, bonds, real estate, art, etc. do you feel comfortable investing in?

Do you invest in the same fashion all the time or do you vary based upon news, interest rates, unemployment, etc.?

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