“Most of us have no chance of being as good as the average in any pursuit that others practice for hours to hone their skills. Anyone, however can be as good as the average in the stock market with no practice at all.” — JeremySiegel, ‘Stocks for the Long Run’
The passive investor is the ideal investment approach for most of the people reading this. The passive investor will guarantee themselves average returns by investing in Index Funds and therefore will never do worse then the market; but also never do better.
Considering many retail investors do worse then the market average, this is a highly attractive approach. However, Index investing lacks the sexiness of buying individual stocks and due to this lack of sexiness many retail investors feel that in order to be considered ‘cool’ they should avoid the un-sexy Index funds and buy the sexy individual stocks; pure folly.
Sadly we’ve all had at least one friend, cousin, brother or sister brag about how they “day trade“, projecting a huge smile while saying this proudly; or a huge frown, if they’ve already experienced its pitfalls. That being said, when it comes to investing leave your high school mentality at the door and just worry about building wealth.
- Spend minimal time managing your investments
- Guarantee yourself average market returns
- Never do worse then the market
- Almost impossible to outperform the market
