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Crackerjack Returns

Crackerjack. Crackerjack?

I stumbled across this word the other day while reading an investment article. I have heard of Cracker Jack. You know, the caramelized peanut and popcorn snack stuffed with a crummy toy of some sort. But this investment article was not talking about the famous junk food snack. It was using ‘crackerjack’ as adjective.

Crackerjack? Even using the context of the sentence, I could not formulate a guess as to what the word meant. So I looked it up.

Turns out, crackerjack is an adjective used to characterize someone or something as exceptionally good.

Really? Exceptionally good? Maybe it is the lousy toys in Cracker Jack boxes that taints my word association, but I would have guessed the exact opposite.

To me, crackerjack should describe someone or something of very poor quality or performance. For instance, “Where did you get that crackerjack engagement ring – a Cracker Jack box?” Or, perhaps, “What toy did you get with your Happy Meal? It’s probably a real crackerjack that will end up in the trash when we get home.”

The meanings of words do not always align with our internal connotations. Much like names. Ever a met a Ben that looked like an Adam?

The same goes for investments. Take the word ‘stocks,’ as an example. When I think of the word ‘stocks,’ words like “potential” and “growth” and phrases like “long-term performance” and “wealth creation” rush to my mind. These are all positive relationships.

Of course, ‘stocks’ should also invoke words like “risky” and “diversification” too. For me, however, those words, while fantastically important, are secondary. I first think of the good.

But for some people, when they hear the word ‘stocks,’ they may think of words like “scary” and “uncertain” and phrases like “roller coaster ride” and “complete loss.”

It’s all a matter of perspective.

Unfortunately, your perspective could be costing you dearly on your path to retirement. If you view stocks as something to be feared and avoided, your prospects for retiring comfortably just got a whole lot dimmer. In fact, the lights may have gone out.

Building up your retirement funds without relying on stocks is much like cleaning a toilet with a toothbrush. Sure, it’s possible, but the process could be much easier and faster using the right products.

If you are in the “stocks are scary” camp, here are some facts to consider. Between January 1926 and October 2016, a broadly diversified basket of U.S. stocks has returned around 9-10% annually, on average. Over ten-year timeframes, the U.S. stock market has been positive 94% of the time. There has never been a 20-year period in which the return of the U.S. stock market has been negative.

The take-away is surprising. The result of investing in stocks is quite predictable over long periods of time. In the short term, though, it can be shockingly unreliable.

If you are a long-term investor – and most of us are; even a 65-year-old today is expected to live approximately another 20 years – stocks are the best way build your nest egg and retire comfortably.

As it turns out, over long periods of time, stocks provide crackerjack returns. Until a few days ago, that’s a phrase I would have never expected to write.

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