Hey guys, it's sasha listen up, because this is very important. Your long-term investing strategy totally sucks if you aren't getting at least a 500 return on your investment and just before you click off, try watching this video first. You might just surprise yourself by what you hear, because here's a fun fact that sounds really weird when you just put it this way. If you want to invest in a stock for the long term, you should only do it if you're targeting a 500 percent return on your investment and in a world where we see people boasting on tick tock, making one zillion percent on some dog token or selling Jpegs to each other for a hundred thousand dollars.

You might think that i have finally joined the dark side, but let me explain this concept in a bit more detail, because once you see it, you won't be able to unsee it. So if you're watching this video i'll assume, there is a pretty decent chance that you're investing in individual stocks, because if you're, not your investing strategy is pretty simple, you just go and shove your money into the s p. 500. At the end, you don't need to worry about it, and you probably don't need to watch this video and in almost every case that is the best strategy is going to give you the best returns over time for almost everyone.

It is also great because you don't have to watch random guys on youtube talking about specific stocks, talking about investing strategies, giving you tips, and you can. You know instead watch cats doing funny things with a cup of tea in your hand, but i also know that most of us me included, can't resist to this temptation, and we all think that we are in that five percent that can beat the stock market consistently. So off we go investing in individual stocks guilty. So if we didn't have this massive ego and if we didn't think that we are smarter than everybody else, we could go and safely get our 10 return per year on average in the long run, because that is exactly what you would get from just investing in The stock market on average - that is what the stock market generally net some years like the last few years, for example, will be much higher than that.

But other years you're gon na have crashes, you're gon na take a massive hit and on on average it will average out. So if, like me, you are determined that you can, for whatever reason, do better than that 10 per year, even though the odds are completely stacked against you. You need to pick stocks where you expect the return rate to be higher than 10 right, because there is no point in picking a stock where you hope for it to return you five percent, when the s p 500 will, on average pay you double. That's why it makes no sense to say, invest in a dividend stock where you don't expect the price the share price to go up.

If it pays, you four percent, because you might as well just buy vu or vuso depending on where you live and just get your 10 return anyway. Okay, so you're going to have to go and try to get something above 10 right because otherwise there's no reason to do anything other than invest in the market. So should you target 11 or maybe 12 percent? Well, the practical answer would probably be no. Is the extra risk worth the small incremental margin? Your investments are not diversified when you're picking just a few stocks - and you will be massively overexposed to specific companies and to specific industries - and things will happen over time to some of those specific companies and industries.

Is the time that you are looking to spend studying the stock market studying individual companies analyzing and following those companies worth that extra one percent return, i would wager that most people could make far more money spending all of that time, working a minimum wage job instead. So you want some kind of a buffer and, let's say you're happy if you're making, for example, 15 a year, that is a very, very good rate of return by the way and 15 is substantially more than the 10 percent that the market average will give. You, especially after you, take the compounding effect into consideration, but here's the problem. I already said that investing in a stock market overall is relatively volatile.

Some years you might get 30 return and other years you might be down 20 percent. So while it averages out to 10 per year, there's going to be a lot of swinging around and the fluctuations are pretty big, even though you're invested in the stock market average. But if you instead you're investing in just a small handful of stocks. Those fluctuations are going to be way bigger, much much bigger, so some years you might pocket a hundred percent return, maybe even 150 return.

That will happen. The last 12 months are certainly in that sort of category for people like me, but other years, people like me are also going to be shaving 40 to 50 off our portfolio or even more. In some cases. Those will also happen.

It doesn't matter if you think you're an awesome investor. Trust me. It will happen now. Most years won't be one of those big extremes, so you're not likely to always be sitting at minus 50 or plus 100.

For you know most of your investing years, but you're still going to see a fair bit more volatility than the stock market on average and because the size of that volatility is greater than the stock market, you want to target a slightly higher rate of return than The one that you might be satisfied with to bake in that difference as a risk factor, if both for example, both your target 15 and the stock market 10, had exactly the same level of volatility. Then, just aiming for 15 would probably be just fine, but because that distribution around your target is not the same. You really want to go over the 15 mark to not let the particularly bad year smack your portfolio down much harder than they should. So if you're picking stocks based on this kind of way of thinking, it may be a good idea to target 20 return per year as your goal, just in case you forgot, while i was talking about volatility, that is an almost impossible goal to achieve on a Consistent basis over a few decades, warren buffett has only managed to get 20.0 percent average return with berkshire hathaway.

Since 1965, and very very, very few fund managers have ever achieved a consistent level of 20 or more over a long period of time on average. But hey you and me are obviously way smarter than all of those guys and we clearly know far better right. So, okay, let's target 20, i mean it's hard, but it is achievable and there are examples of people doing it. And let's say that you are actually a long-term investor, because many of us will call ourselves long-term investors but then get frustrated when a stock we bought hasn't gone up by a hundred percent in five months in the time that we've owned it.

I know because i get those comments in my videos every single day from somebody saying yeah, i bought parenters traded sideways, what's happening man, but let's say you do actually want to invest for the long term, let's call long term something that is actually long term. So, rather than two to three months: let's, let's call it 10 years, for example. Now, if your stock goes to the moon way before that 10 year period, and you decide to sell because you no longer see an upside, that's great do what you have to do. If that happens in six months, well sell it, then if that happens in three years or five years, that will be the point.

But let's say you believe in the company's long-term vision and you continue seeing the upside your default position as a long-term investor may be that you will plan to hold that stock for 10 years. Unless something happens and over those 10 years, you want to get that 20 percent return per year right, and here we get to the magic effect of compound interest. After one year, you are 20 up on your investment, but after two years you are 44 up and after just three years you are 73 up now go and get your calculator out and type in 1.2 to the power of 10, and the answer is 6.19. That's 619, but remember that the first 100 out of that is the money that you are investing.

So if you do get your 20 per year return for 10 years in a row, you are actually targeting a return of 519 on your investment see. I did tell you this might surprise you a little. So when we talk about very long-term outcomes, it might sound very odd without kind of thinking it through when you go and say actually what you're really trying to do here is. You are targeting a return of 500 over the next 10 years.

That sounds kind of absurd, but if you do the maths and you're picking stocks rather than investing in the market index, that probably is what you're actually doing or at the very least it may be. Should be, but before you get too excited, remember that it won't actually happen, because there is a 99 chance that neither you nor i are warren buffett and so you'll probably get a fair bit less. If you compound that 10 percent market return over 10 years, you get 160 return, even though it's over 10 years, that's actually still not too shabby. So even if you don't hit your 20 average that you aiming for, but you do still manage to beat the market.

You should be getting somewhere between at 160 and the 500 percent that 20 per year gets. So if you do just about beat the market, you should be somewhere in a 200 to 300 percent return territory, and that sounds bonkers right. But in order to get that you kind of have to aim a higher to start with and then fail to reach those heights, because let me share something with you: if your strategy is only targeting 200 total return, so just above the market, the likelihood is, if That's the maximum that you are aiming for. You are likely to end up hitting somewhere less than that and there you have it.

If you have a stock picking type of mentality, if you're that kind of stock picking kind of an investor, then your strategy completely sucks. If you're not targeting a return of 500 over the next 10 years, if you found this video useful, please don't forget to smash the like button for the youtube algorithm. Thank you so much for watching. I really really appreciate it and, as always i'll see you guys later, you.