I can think of no other discipline with diminishing returns quite like stocks. Investing in a low-cost index fund that matches the S&P 500, (I recommend Vanguard’s VFIAX), will beat the average actively managed portfolio. And not just the actively managed portfolios of retail investors like you and me. No, I’m talking about Wall Street mutual funds run by Ivy League MBA’s.
It’s really quite remarkable. Consider a boat race where half the boats end up going slower than the damn water current. The people racing the boats would have to be incompetent. But in reality, the people racing the boats are some of the highest paid professionals on the planet.
It’s a giant scam and so are actively managed mutual funds. Thankfully, people have been flocking to index investing due to higher returns and lower expense ratios. And that’s a hard thing to compete against.
Written in 2015
1. Warning
2. Emergency Fund
3. Credit Card Debt
4. Employer Matched Retirement Funds
5. Other Debt
6. Time Horizon
7. Index Funds
Podcast: Investing 100