About the question about what the average return of stocks is. Which marekt over which time period?
Here is a link to a chart that shows the returns of various investments since 1950 along with many other things, that I find a handy reference.
http://www.andexcharts.com/c_ewall.asp

Off topic, what is the average return of stocks?

A sizeable chunk of the education from the father of a gal I was dating. Then more came through reading various books and trying out the games at home, with occasional trips to the casinos.

I’m interested where you got your education on gambling?

What became evident was that when I pay attention to the individual stocks, trading when the time was judged right, my performance was better than if I buy & hold. This put me firmly in the traders camp.

I also noticed I was trying to budget too tightly, as money was going into the brokerage account and then some would come back out a month later. Relaxing the strings on how big the deposits had to be made for steadier growth.

In the mid-90s I sought an education on gambling which made me comfortable with the ups & downs of making bets (poker, blackjack, horse racing, etc.). My original reason for getting that education was so I wouldn’t fear the occasional social gambling occasion. Along the way, I found the parallels between paramutual betting and the stock market are uncanny, so applying the principles made sense! A good couple of books that explain paramutual betting are “Commonsense Betting” and “Commonsense Handicapping”.

Like most folks in the 90′s, I eschewed the dividend payers and solely went for capital gains. If there were dividends, it was a nice bonus. As the Dotcom bubble formed around 2000, I started picking up the dividend payers, particularly for my IRA and Roth IRA where I wasn’t planning on trading. Sep 11, 2001 came and went, causing a very small temporary blip in my progress.

In 2004, we traded up in homes. For the next 3 years, money was tight, so I didn’t really reenter the market until 2007. I could see the 2008 train wreck coming and screwed up handling only one stock in my portfolio. That one, however, cost me much more than I expected.

First half of 2009 was spent worrying and fretting over whether we had any recovery, but by July I had confidence. My trading strategy was still working well and I formalized (wrote down) my rules so I wouldn’t stray. I also studied which high yield securities in my portfolio survived through 2008 without cutting dividends (some even increased them!).

The only things left were trying to figure out how to capitalize on the absurdly low mortgage rates and increasing my cashflow so that a job loss could be survived. It wasn’t until November that I discovered switching to a 10/1 ARM from a fixed 15-year mortgage was a worthwhile endeavor and taking cash out to increase liquidity would satisfy both goals.

About 40% of my takehome pay is now deposited in my brokerage account and the total there would meet 2 years of expenses if I lost my job tomorrow. Prior to the start of the year, only 20% of takehome pay was being deposited and there was only 6 months of living expenses available.

George, your approach sounds very well-suited to the current economy. How did you develop your strategy?

And so I’d advise the true passive investor go with Robert’s statement: “People who have no knowledge at all should “invest” in safe vehicles such as GICs, savings accounts and savings bonds.”

Myself? I’m an active investor and blend gambling (horse race odds-making) and statistical techniques with the traditional financial techniques for picking stocks and setting trades. In this sideways market environment, I like high yielding companies and trading price swings.

Robert: You seem to be thinking only of active investors. Passive investors just buy the market through indexes. No need to know the companies. Also keeps cost down and helps outperform the majority of active investors.