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The data says most managers will not out perform the index. So instead of trying to beat the market you should just find the lowest expense index fund and put y

The data says most managers will not out perform the index. So instead of trying to beat the market you should just find the lowest expense index fund and put your money in there. Lower your risk by risk pooling. Avoid the Fees. Profit.

tonyedgecombe 11y ago
I think a lot of people have the attitude that they need to beat the market, once you accept that just following it provides a good rate of return index funds make a lot of sense.
coliveira 11y ago
Wrong. Even if everybody invested in index funds, you would still be subject to the market fluctuations and the very important decision of when to buy/sell. For example, for the period of 1999/2012 the gains in an index fund are very small or negative. So, although reducing your fees is a smart move, it doesn't automatically translate into profit as you imply.
- dap 11y ago
  The NYT has a useful visualization of S&P 500 returns over various periods since 1920: http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html http://www.nytimes.com/interactive/2011/01/02/business/20110...
savanaly 11y ago
My understanding of robo advisors (and I'm super willing to be corrected on this if I'm wrong) is that they mostly allocate your money to lowest expense index funds, which is what you recommend and most smart people already do. So why do you need robo advisors at all? Two reasons that I can see: * daily tax loss harvesting exists, so you can make more money if you are selling daily the funds that lost value so you don't have to pay taxes on the ones that gain value. Not sure how much this actually does, which is the main reason I'm not sure if robo advisors are worth it! * keeping a balance between national low-cost index funds and international low-cost index funds is desirable so you can decrease volatility without decreasing expected returns. This is not all that hard to do on your own but it is an advantage of robo-advisors that you don't have to do it yourself.

tonyedgecombe 11y ago

I think a lot of people have the attitude that they need to beat the market, once you accept that just following it provides a good rate of return index funds make a lot of sense.

coliveira 11y ago

Wrong. Even if everybody invested in index funds, you would still be subject to the market fluctuations and the very important decision of when to buy/sell. For example, for the period of 1999/2012 the gains in an index fund are very small or negative. So, although reducing your fees is a smart move, it doesn't automatically translate into profit as you imply.

dap 11y ago
The NYT has a useful visualization of S&P 500 returns over various periods since 1920: http://www.nytimes.com/interactive/2011/01/02/business/20110102-metrics-graphic.html http://www.nytimes.com/interactive/2011/01/02/business/20110...

savanaly 11y ago

My understanding of robo advisors (and I'm super willing to be corrected on this if I'm wrong) is that they mostly allocate your money to lowest expense index funds, which is what you recommend and most smart people already do. So why do you need robo advisors at all? Two reasons that I can see: * daily tax loss harvesting exists, so you can make more money if you are selling daily the funds that lost value so you don't have to pay taxes on the ones that gain value. Not sure how much this actually does, which is the main reason I'm not sure if robo advisors are worth it! * keeping a balance between national low-cost index funds and international low-cost index funds is desirable so you can decrease volatility without decreasing expected returns. This is not all that hard to do on your own but it is an advantage of robo-advisors that you don't have to do it yourself.