As Americans, the dream of getting rich quickly is alluring, and many see the stock market as a way towards this goal. Movies like the Wolf of Wall Street and the Big Short will have us believe that if we are just smart enough, we will be able to beat the market and become rich. But that’s just Hollywood folks.
Investors young and old are always on the lookout for new opportunities to put forth their money into the latest stocks in an attempt to make a quick buck; but how often do they actually win?
To put it simply, 98% of them don’t. In fact, one study took a group of the best hedge fund managers on Wall Street and put them up against a group of monkeys. You guessed it. The monkeys outperformed the hedge fund managers every time. Every. Single. Time. That’s right, the people you thought were geniuses with PhDs from Harvard in Math and Statistics. Up at 6 a.m. and working until Midnight pulling their hair out and drinking six coffees a day with a cocktail of anti-anxiety medications are being beaten by monkeys. But that’s not their fault.
Our economy and stock markets are living, breathing, organisms that respond to emotions, droughts, hurricanes, and almost any other factor you can think of!
Now, I’m not trying to discourage anyone from investing in the market, however, what I would like to say is that frequently buying and selling individual stocks is not only a good way to lose a good chunk of cash, but also a good way to unnecessarily raise your blood pressure.
But don’t worry, there’s a solution!
Enter the mutual fund, or ETF, or index fund. These funds have hundreds, sometimes thousands of stocks, bonds, and other financial instruments that are all bundled together into one fund. The advantage here is diversification, and passive, safe investing with overwhelmingly BULLISH trends. You may not have as much “fun” but the returns are almost guaranteed over long-term periods. This is Wall Street’s worst nightmare. To look at Vanguard’s funds and performance click here. They are the absolute leaders in this field for having pioneered the mutual fund/ETF and they hold over 4 trillion dollars in assets.
Safe to say these guys know what they’re doing.
