Debunking Investment Myths

As someone who invests in their future, you're likely eyeing what drives investment returns. But it’s all-too-easy to be distracted by a number of investment myths. These are nothing but short-term noise that can cause you to miss the big picture of long-term gains.  And it’s no one’s fault. These investment myths are so widespread that even seasoned pros might swear by them. To make smarter money moves, you need to separate fact from fiction and focus on what really matters.

Today, we're discussing 3 BIG INVESTMENT MYTHS that, despite popular belief, won’t likely drive your returns.

Myth #1: EARNINGS REPORTS ARE A PRIMARY DRIVER OF INVESTMENT RETURNS.

FACT: Investment returns and earnings reports have shown no correlation.

Each quarter, investors wait on pins and needles for their favorite companies to release earnings reports. While these offer important updates on how the company is performing and their challenges ahead, they’re a poor barometer for long-term investment returns. And there’s a tendency to greatly overvalue earnings reports when considering a potential investment.

If earnings were an indicator of investment returns, we would expect to see earnings growth preceding a rise in investment returns. But this isn't the case. Looking at the S&P Composite Index, we can see that earnings and returns do not align as expected. In fact, over the past century, there is almost no correlation between earnings growth and investment returns.

The takeaway? EARNINGS SHOULD BE TAKEN INTO LIGHT CONSIDERATION, BUT DON’T LET THESE QUARTERLY CALLS INFLUENCE YOUR LONG-TERM INVESTING GOALS.

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