The Silent 3% Killer

I would like to once again touch on one of my favourite topics ‘Investor Return Apathy’. Unfortunately most people do not even know what their returns actually are, but when they do get lucky and find out it doesn’t seem to matter to them anyway. Why do we demand such high levels of customer service and product performance in almost every aspect of our lives, but accept mediocre portfolio returns? Why do we shop around to save $50 on a piece of furniture, but turn a blind eye to hundreds of thousands of dollars lost in our accounts?

It is often possible to increase the return of a neglected portfolio by 3% per year through a combination of superior investments, cost reduction methods, and proactive management. I call this the silent 3% killer for those who don’t care. Here are some numbers showing what 50k becomes when compounded at various rates of return over a 20-year period. For example you will notice that settling for an 8% return instead of 11% costs you 170k (73% more). If you had a 300k portfolio your loss would be $1,020,408. 

6% = 160k   7% = 193k   8% = 233k   9% = 280k   10% = 336k    11% = 403k   12% = 482k   13% = 576k