Monday Morning

May 17th, 2021

It’s on you

Whether you like it or not, there are a set of rules in this game and most of those rules aren’t going to change just because you don’t like them. Your employer, your boss, your family, your government, none of them are going to make your life better, so stop looking to them to save you.

Instead, focus less on bitching and moaning and more on taking full responsibility for your life. In other words, find a way to succeed in spite of the rules. Your time will be much better spent.

Not so fast

If you’ve been invested in the markets these past 10+ years you’ve probably made out quite well. With major indices like the S&P, Dow, and NASDAQ at or near record highs, 401K balances and other investments have ballooned.

But I’m starting to see a sign that things are heating up perhaps a little too much. The sign? The number of amateur investors talking about their investing prowess and how they’ve made huge returns on individual stocks, or any number of other investments.

For someone like myself, and many others, who invest in index funds and don’t actively trade, it can be tempting to question your approach in the face of such information.

But remember, it’s always easy(er) to make money when everything is going up, as it has been for a good part of the past decade. It’s like the difference between running a marathon with 20 mph winds at your back vs in your face.

Many of these investors have never experienced a full blown bear market like we had in 2000 and 2008. Also, much like gamblers, we’re likely only hearing about the wins and not always the losses. Doubling your money on one particular stock is great, but what about the other stocks you’ve invested in?

As Warren Buffett likes to remind us, investing in a fund that tracks the S&P 500 will almost always beat an actively managed fund over the same time period.

Warren himself felt so confident in this that he bet 5 hedge fund managers $1.0M (which would be given to a charity of the winner’s choice) that over 10 years his passive index fund would outperform their actively managed funds. And the winner was?

The S&P 500 Index. The S&P gained 125.8% over ten years. The five hedge funds on average gained 36%. Not even close.

Keep in mind these hedge fund managers are highly compensated professionals who are paid to beat the market and make money for their clients.

So why do so many people ignore these results? Because index investing isn’t sexy. It’s not exciting. We invest our money and forget about it. We don’t track our stocks on 3 monitors with visually impressive graphics, like we see portrayed in many broker advertisements.

But in the end, it’s not about being sexy and exciting. It’s about making money. Just ask yourself which is more important.


“Be fearful when others are greedy and be greedy when others are fearful.” – Warren Buffett

Have a great week everybody.


2 thoughts on “Monday Morning

  1. Good Mornng!

    Great words here Rick.

    I would love to share this on the blog / newsletter if you would be up for that.


    Liked by 1 person

    1. Absolutely. That means a lot. Thank you for your incredible support!


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