Pruning the Dead Branches

It isn't hard to show what happens when you hang on to losers, or even the inferior "winners."

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Compared to market returns, an investor underperforming the market by 2% (or achieving an 8% return) falls:

• 17% behind a market performer after 10 years,
• 31% behind over 20 years, and
• 42% behind over 30 years.

An investor underperforming by 6% loses:

• 43% to the market-performing investor over 10 years,
• 67% over 20 years, and,
• 81% over 30 years.

That's quite a price to pay for underperformance.

Now, if your investments are producing negative returns, the results can be quite ugly indeed.

There's a lesson in these numbers: Don't hang on to chronic losers! Not only do you lose, but you also lose the out on opportunities to gain. If it's broke, fix it!