Carl Richards of the Behavior Gap blog paddles the bad ideas of "average returns" in an enlightening post on investing. He also explains why it's a great time to jump in, if you're young.


In companion posts at the Get Rich Slowly and I Will Teach You To Be Rich blogs, Richards explains how relying on the glossy brochures and short-hand financial language of "average returns" can lead anyone astray. It's obvious to anyone living in the U.S. right now that the market has some pretty off years, of course, but Richards' explanations help really kill off the idea that one can time a graceful cash-out at a pre-determined point, and show how getting in now, if you're young and have years to contribute, could really help.

The walk-away points from his I Will Teach You post:

9) Because every person has unique savings and withdrawal goals, real financial planning can not be done as a one-size-fits-all solution. 10) Understanding that average is not normal should result in the realization that real financial planning is a process of setting a course and then making the small course corrections as we deal with the random nature of returns.


Here's a short slide presentation used to illustrate (and tease) his larger points:

Click to view

Why "average is not normal" - and why most people get this wrong &

Investing 101: Average is NOT Normal [I Will Teach You To Be Rich & Get Rich Slowly]