From the category archives:
Index funds are–and probably will continue to be–the easiest way for an average Joe to invest. But contrary to popular belief, they’re not a “set and forget” type investment.
With index funds, you still have to:
Decide Which Index Funds to Use – Most people think of the Vanguard S&P 500 fund when they talk about index [...]
{ 6 comments }
A good story really helps to spread an idea. The story told by the actively managed mutual fund industry goes something like this:
“Index funds are for average investors. You are smarter than average, aren’t you?”
That’s the sales pitch behind the entire industry. And it’s a fairly easy pitch to make given that most people really [...]
{ 9 comments }
At least a couple times every week, I’ll get an email or comment on the blog explaining why I’m an idiot for recommending a buy & hold index fund strategy. Usually, the writer is kind enough to share a strategy that they’ve been using successfully to earn “very impressive” returns.
The following are the 3 questions [...]
{ 5 comments }
Given the choice, which would you prefer?
$100, or
A coin flip: Heads you win $200. Tails you win nothing.
Each scenario has the same expected return, yet most people (myself included) would take the $100 without a moment’s hesitation. That’s because most of us are risk averse–all else being equal, we prefer certainty to uncertainty.
So if every [...]
{ 1 comment }
Quick weekend update: Poorer Than You is hosting a giveaway for a laptop + netbook combo. The requirement for entry is to “create a piece of multimedia that embodies a sound personal finance concept” (hopefully one particularly relevant to young people).
I created a video explaining (what else?) the benefits of investing via index funds. The [...]
{ 2 comments }
From time to time I get emails or comments from people who have moral qualms with index funds–the issue being that the investor doesn’t want to own shares of companies that do things to which he/she is ethically opposed.
First of all, let’s be clear on one thing: Buying shares in a company does not really [...]
{ 8 comments }
Most buy & hold index investors seem to be converts from various schools of active investing. At the same time, I’ve met very few investors (none, off the top of my head) who have moved from being index investors to being fund pickers or stock pickers.
There seems to be some sort of lesson there. [...]
{ 11 comments }
The general premise of the Efficient Market Hypothesis is that there are so many investors buying and selling securities that, at any given point, the price of each security should accurately reflect all known information about the underlying company.
Therefore, the most strict believers of EMH believe that (aside from pure luck) there is no opportunity [...]
{ 10 comments }
I talk a lot about the benefits index funds. Usually, I’m referring to the fact that their low-cost structure and low portfolio turnover give them an advantage over actively-managed funds. What I don’t think I’ve mentioned before are the psychological benefits that can come from owning index funds.
Confidence from knowing what you own
When you own [...]
{ 5 comments }
In reply to my post at MoneyNing last week, one commenter (a writer for FiLife) replied that:
“Index funds NEED actively managed funds or stockpickers in the market. The market moves when people have opinions on individual stocks, sectors and ideas.”
Am I missing something? As far as I can tell, this statement represents a flawed understanding [...]
{ 7 comments }
Neal of Wealth Pilgrim added a comment on a post earlier today asking the following:
One question – No Load Fund X newsletter -is one of the most consistent top performing newsletters – and it ranks ETF’s and Index funds against active funds. The ETF’s and Index funds aren’t always at the top. What say you [...]
{ 5 comments }
