Index investment pioneer Charley Ellis said the success of index funds is still a fact: “It is almost impossible to beat the market.”ETF Edge. ”
But Ellis warns another obstacle Long-term poor performance by active management This has hindered many investors: You may be your biggest enemy when it comes to investment strategies.
The complexity, volatility and an unlimited number of other variables can cause unpredictable price volatility, but your own way of thinking is also key to the variables that can make your financial portfolio return.
Ellis details a series of unconscious biases in his new book, Rethinking Investing, that influences our thinking about money in the market. Some of the big ones he tells about in his book:
- The fallacy of the gambler: Believe that since you choose one stock correctly, you will choose all other stocks correctly.
- Confirmation bias: Seek information to confirm preexisting beliefs.
- The mentality of the cattle: Blindly follow the actions of large groups.
- Sunken cost fallacy: Continue to invest in failed investments.
- Availability: affected by easily accessible information, whether it is actually valuable or not.
Ellis said the impact of these biases on your portfolio strategy may be major and should make investors “rethink” their approach to the market.
“Instead of trying to get more fees, try to reduce payments,” he said. “That’s why ETFs…make great sense.”
Research shows ETFs are usually cheaper than traditionally managed mutual fundsdespite traditional index mutual funds such as S&P 500 funds pioneer and loyalty There are also super low fees (some even charge for free).
Ellis believes that using lower-expense funds, coupled with our behavioral bias, can help investors win years or even decades later.
“They’re boring, so we leave them alone and in the long run, they’re really, really beautiful.”
Dave Nadig, a long-time ETF expert who appeared on “ETF Edge” with Ellis, agreed.
“It’s always awful for people to try to predict people,” Nadiger said.
He also pointed out the mistakes made by many investors Try to beat the market Only by timing can you surpass yourself. “There are more days than good,” Nadiger said. “If you missed the best days on the market and you missed the worst 10 days on the market, you’re still better than you just invested Much worse. Mathematics in mathematics is hard to argue about.”
Ellis offers another mind-shifting tip in last week’s ETF Edge, focusing on investors who provide enough investment for a safe retirement: Begin to think about the income source of Social Security in new ways.
