How not to run out of money in retirement. Guaranteed!

Given today’s unprecedented low interest rates, it is almost impossible to build up an adequate retirement fund by saving alone.  We need to invest.

Historically, over the long term, properly selected US market index exchange-traded funds, held in tax-advantaged accounts, in an appropriate asset allocation, have been the investor’s best way for growing savings and are likely to remain so for many years.

In less than one hour, a high school student could learn how to invest in this safe, effective and evidence-based way. Nevertheless, the percentage of investors who do so is much closer to 0%  than to 10%. That includes professional money managers.

As one example, Dalbar showed that in 2018 the S&P 500 lost 4.38%, while the average investor lost 9.42%. Another Dalbar analysis, reviewing a 10-year time period, showed that the average investor earned only a 2.6% net annualized rate of return or less than one-half of what the S&P 500 earned. Reviewing any single year or time period would show a similar individual investor underperformance.

How can we do better?