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Agreed - it's what the average investor should do. Even if it's really hard to beat Index Funds consistently, there are two factors that will make active tradin
by tommynicholas 10y ago
Agreed - it's what the average investor should do. Even if it's really hard to beat Index Funds consistently, there are two factors that will make active trading always important:
1. Some people will beat the market, and regardless, someone has to try or there's a massive opportunity left on the table.
2. Indexing actually has more of a certain type of risk than passive investing, because if you take a huge loss for some period of time, you can't hedge it and cut the short term loss. You have to just hold. Active investing can be really valuable for folks as they enter phases of their life where big losses are unacceptable and they're willing to forgo some of the upside.
- saryant 10y agoYour second point has nothing to do with indexing and everything to do with asset allocation. If you're nearing retirement, you shouldn't be holding risky assets like equities.
- adwn 10y ago> If you're nearing retirement, you shouldn't be holding risky assets like equities. That is not quite right. When entering retirement, most people can expect to live for at least 20 more years, which means they should hold a non-insignificant fraction of their wealth in stocks.
- sokoloff 10y agoExactly. Further, those who find themselves in the fortunate situation of being overwhelmingly likely to leave a significant estate to their children should consider investing their funds according to the life expectancy of the children, not their own.