Comments on: We Should Buy Index Funds Instead of Stocks Even If We Can Beat the Market

By: C.C. Collins

C.C. Collins — Mon, 30 Aug 2010 15:37:19 +0000

As an individual investor with less than, say $20,000,000, to put to work you can beat the “market”. Which market leads to a whole different discussion.

Let’s assume that the Nasdaq 100 is the “market” we desire to beat. Discussions about whether or not you beat the market are always based on
the market’s progress in ONE direction, UP.

On the other hand, you can invest/trade in TWO directions if you are willing to use inverse funds like the ETF symbol QID. Actually it’s a double inverse
fund with great liquidity and you can participate in the short side of market with buy transactions only, gaining leverage but using no margin. This is a real plus where certain accounts prohibit going short.

Timing makes it possible to beat the market and as an individual investor you stand a much greater chance of growing your account(s) as opposed to the poor track record most professionals have to offer you. I know, I was in the industry.

Always seek and participate in financial self education. You can become your best financial advisor.

By: MoneyNing

MoneyNing — Thu, 08 Nov 2007 22:02:28 +0000

Raj: There are many people that can beat the market. There are just many more people that don’t. Good luck with your investments and I hope you are one of the people that are better than average.

Randall: It’s often very hard to separate everything. You are special so cherish that talent.

By: Randall

Randall — Thu, 08 Nov 2007 11:36:03 +0000

I don’t feel (personally) that the two are related; The urge to save vs. the desire to invest. I invest in mutual funds rather than stocks, but that $5 Starbucks coffee still hurts. It’s kind of the “Penny Wise, Pound Foolish” but in reverse. I pay careful attention to the investments, but take MORE care in buying stuff.

By: Raj

Raj — Wed, 07 Nov 2007 18:54:31 +0000

I think you can beat the market. I think it happens a lot. You can be a value investor without utilizing index funds.

I recommend reading the Intelligent Investor by Benjamin Graham.

By: MoneyNing

MoneyNing — Wed, 07 Nov 2007 18:11:53 +0000

Carl: Great testimonial for index funds. I think they are great and something that works for 98% of people out there. However, I bet 98% of people buy stocks since it is more exciting.

By: Carl

Carl — Wed, 07 Nov 2007 14:06:35 +0000

Very few people can actually beat the market on a regular basis. Even professional investors (active mutual fund managers) on average underperform the index funds mainly because they charge fees for their efforts.

The main reason I would choose index even if I could do better (and I cannot) is that the stock market should be a long-term fire-and-forget type investment, not a speculation. If you invest actively, you are always preoccupied with the market and there is always an itch to make a trade. Even if the trade is sound, you lose some money on commissions and fees.

I think of my stock funds with a 30 year horizon. I hope to structure my finances so I will not need to touch my shares. I rather spend time with my family or work on my career than fret and worry about stock price. That I think is the true beauty of the index fund.