The Real Truth About Investing
There are hundreds of investment funds out there and each of them is trying to actually outperform the market. Many of them have fancy words in their names as growth, low risk, high yield, etc. But the truth is that most of them are … gamblers. Yes, they are gambling with other people’s money and in the same time they are charging decent fees to do this. According to a study tracking the performance of 355 investment funds for 35 years (from 1970 – 2005), just 7 of them managed to beat the market with more than 2%. 9 out of 355 is a scary number. What are these extremely high paid fund managers of the other 346 funds get their salaries for? You could just invested your money yourself, buying the constituents of a stock index and beating all of them. Well, statistics show that you could have really done this. Passive investing is the name of the game. This means just buying a well diversified portfolio of shares and holding them, without trying to time the market and without actively trading. This way you don’t pay for management fees and you don’t pay much taxes and trading commissions. According to the video below, nobody knows anything about the market tomorrow, because no one ca predict the future. This is why the best investment strategy in the long run would be passive investing, or in other words, just following the market. I can say, that I quite agree with this video. Passive investing is not only statistically the most probable way to make money on the stock market, but also it’s a lot healthier, too. When you invest passively you reduce the stress caused by losses caused by wrong investment decisions. This way you eliminate emotions from the game, which makes your chances for profitable investing a lot bigger.
For some more proofs about the advantages of passive investing, watch the following video. It can really change your view about investing.
This article is not an investment advice. It’s my personal opinion and just an interesting point of view on investing. If you think it’s interesting, you could consider sharing it with friends.