Newbies Investing Questions

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A cerebral discussion: "Average Stock Market Returns Aren’t Average"

"Lady luck is a bitch, she takes from the many and gives to the few"

"The average investor in the stock market will earn less than the average stock market return–this is true even without taking into account any behavioral biases. A reasonably diversified portfolio of stocks can expect to earn 7% per year on average. Thus, it’s easy to see that the expected payoff from investing $100 and holding for 30 years is $100*(1.07)^30=$761.23. The expected payoff, however, is subject to a lot of uncertainty–even on a diversified portfolio the standard deviation is about 20% annually. Many people think that uncertainty washes out when you buy and hold for a long period of time. Not so, that is the fallacy of time diversification. Although the average return becomes more certain with more periods you don’t get the average return you get the total payoff and that becomes more uncertain with more periods."

https://marginalrevolution.com/marginalrevolution/2014/07/average-stock-market-returns-arent-average.html