DIVERSIFICATION, PATIENCE, FOLLOW THROUGH
Most of the secret recipe for strong portfolio performance over the long run is:
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OWN ALL OF THE ASSET CLASSES
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Here is a simple table that shows annualized performance for each asset class, from 1996 through 2024:
Normal volatility means that most of the time, Large U.S. stocks would be up as much as 28.1% (10.1+18.0) or down as much as 7.9% (10.1-18.0) in a given year.
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You many look at this and think, "I'll just buy and hold stocks and real estate funds." That would work, except in some years, when it didn't work. Like 2000, or 2008, 2020 or 2022. Those years, bonds outperformed stocks by far.
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A hybrid portfolio that, between 1996 and 2024, owned equal amounts of the first 5 asset classes, and about 30% in bonds would have returned about 7.8% annually, with volatility of only 11.8%. That competitive return, featuring lower volatility, gives you peace of mind in the short run and the ability to forecast your savings into retirement.