By Dan Greenshields, president of ShareBuilder Securities Corporation, a subsidiary of ING NEW YORK (TheStreet) -- Chances are your NCAA tournament bracket is already busted. Every year during March Madness, most of us learn the same lesson -- we're terrible at picking winners. West Virginia's Da'Sean Butler attempts a shot against Kentucky during the NCAA East Regional final.
Fortunately, it doesn't have to be that way. Imagine if you could win your NCAA pool by simply betting that the eventual winner would be no worse than an eight-seed in the tournament. History would be on your side -- no team with a seed worse than eight has ever won the tournament. You can make a similar proposition in the investment world simply by committing to regular investments in broad vehicles that cover wide swaths of the market. You don't need to roll the dice and put all your money on the top seed or a sleeper pick. It may not have the cachet of riding a Cinderella team -- or particular investment -- to glory, but it's the easiest way to secure the modest annual returns that can add up to long-term wealth. Achieving average returns can work. Consider an S&P 500-tracking index mutual fund or exchange-traded fund. According to Ibbotson calculations, an investor who put $10,000 in such a fund, which diversified his or her investments, at the beginning of 2003 would have had about -- without adjusting for mutual fund fees -- $14,450 at the end of 2009 -- a 5.4% annual total return during a six year period, which included a financial crisis. Certainly, past performance is no guarantee of future results and a fund's prospectus should be carefully reviewed prior to investing. With a longer horizon, if he or she had invested the same $10,000 at the beginning of 1990, his holdings would have increased nearly five-fold in value with an annual total return of 8.2%. Of course, not everyone has $10,000 to invest in the stock market. Assuming you're working toward a long-term goal, investing even small amounts regularly can be beneficial. If our hypothetical investor had invested just $100 each month into an S&P 500 index fund starting in January 1990, according to Ibbotson, he'd have about $49,000 at the beginning of 2010, a return of 5.7% even with the extreme market volatility. Loading Comments... 1 2 Last » Next ›SHARE:
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