Thursday, August 07, 2008

The Typical Stock Investor Loses Money?

Check out this post on The Digerati Life, analyzing a recent report on the success of the typical stock investor - an average return of just 3.9% over the 20 year period between 1986 and 2005 and that's for an equity mutual fund investor (not the crazy day-trader next door)! If the report is correct, most people would do better to stick their money into a bond fund and possibly even a CD and forget about it.

I must say, the results surprise me, even though I have long known that most active investors underperform the market. Hey, that's what I keep telling you folks: (i) diversify; (ii) invest in index funds; (iii) minimize your costs (e.g. fund expense ratios); and (iv) don't trade.

Is it going to take an act of god to teach people that they are not Warren Buffett and that their chances of beating the market are just not that good?!

Incidentally, check out the latest Carnival of Personal Finance on the Squawkfox where my angry post on the recent housing bill is also included.

No comments: