We all know that if it sounds too good to be true, it probably is. Long-term data gives us the yardstick to measure whether something is too good to be true. You will buy a lot less pie in the sky if you keep this in mind. Later we will see that individual investors are often their own worst enemies. Investor behavior can be extraordinarily shortsighted.
Foolish investors insist on making their long-term decisions based on very recent experience.
Lemming-like, they run from gloom and doom to euphoria. In the process, basic discipline flies out the window, and bad things happen to their investment results. Remembering long-term results can keep them from shooting themselves in the foot. Inflation is the erosion of buying power over time, if dollars are used as a store of value. In other words, our returns must jump this hurdle in order to provide meaningful increases in value.