It wasn’t the market that was the problem but the way they approached investing.        I understand how a bad market can damage any portfolio but also short-term trading, bad investment decisions and market timing can be just as damaging.

This article is all about investing and gambling and the similarities and differences of the two activities.  I believe when you go to the casino the odds favor the casino, after all that explains why they make billions of dollars every year. With investing the odds favor the market and that’s why very few money managers and investors consistently beat the market.

If this is a new idea for you let’s see if there’s wisdom to my plan. The Russell 3000 is an index that tracks 3000 U.S. stocks. In Russell’s own words “The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.” Keep in mind for this article we will only be only discussing U.S. equities, to own the market and have a diversified portfolio you may also own fixed income, international, emerging markets and REIT’s.

So are you curious to see if owning the market would have improved your overall investment results? If you had been invested in the Russell 3000 index over the past 20 years, from 1991 to 2010 it would have produced an average annual return of 11.36%. The average equity fund investor over the same time period, 1991 to 2010 had an average annual return of 3.83%, that’s an improvement of over 7.50% a year.

So let’s say you now accept the premise of owning the whole market, what might you do next? After you put your portfolio together here is what I would consider doing.  Rebalance your portfolio on an annual basis; monitor your results quarterly, and then most importantly monitor your portfolio, and try to leave it alone unless changes are warranted.

After all is said and done with today’s sophisticated environment of financial products you now have choices that were not available to the average investor in the past, a little research or outside help and you should be able to build a portfolio that lets you own the whole market.

Michael Allison is an independent LPL Financial Advisor and has been helping individuals address their retirement goals for over thirty years. If you would like more information on building your retirement you can email Mike at michael.allison@lpl.com, call him at at 248-334-9600 or visit his website at www.retiringwithmike.com.

Securities offered through LPL Financial.  Member FINRA/SIPC. Asset Allocation does not ensure a profit or protect against a loss. Investing involves risk, including possible loss of principal. The Russell 3000 Index is an unmanaged index which cannot be invested into directly.  Past performance is no guarantee of future results.