Quote:
Originally Posted by legion
Here's what I learned as a Finance major in college. Are you ready for it?
The secret to investing is to put your money in a no-load index fund. The next part is very important: add as much as you can to it every year, and don't touch it until you retire. You will outperform something like 99.99999% of managed funds over that time. You will outperform 99.9999999% of active investors. Literally doing anything else has a much closer chance to 100% than what I have quoted above that you will underperform the index fund strategy.
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That's what I hear and read as well.
if the expenses are 1% or 2% or 3% vs .04%, .1% or even .25%, you're making a big difference over 40 years.
Also, most folks let their emotions rule. They have money in the market. The market goes down, and down, and down, and they panic and they sell. Then, they wait, it starts going up, and up, and up, and their confidence returns and they buy back in with what they sold before. No one ever made money by selling low and buying high. Just leave that stuff alone. Only one thing should happen, more stocks/funds/etc... should be purchased.
Another thing that a lot of folks make the mistake of doing is buying this company or that company because they know the company or they know the business. Yeah, I suspect the Enron folks thought they knew what was going on too. That's why you buy funds. If you buy a fund and it's got 100, 500 or 1500 individual stocks in it and one of them tanks, how much of a hit are you going to take? Not much. If you own stocks in 5 or 10 different companies because you know the company, but then something happens,
PR nightmare, executive naughtiness, etc..., then how much of a hit are you going to take?
low cost index funds, buy in and let the stuff sit there until you are ready to take it out.