I wonder what percentage would be the break even. To some extent, the smarter you try to be, the worse you do in investments. 90% is probably closer to the proportion of investors who should stick to index investing. Here’s an analogy, perhaps it’s not perfect: Suppose you could be guaranteed to score in the 95th percentile on the LSAT, MCAT, GRE, or GMAT exam without studying for even one minute. Virtually every economist who studied this question answers with a resounding ‘no.’” ~Eugene Fama, Professor at University of Chicago and Nobel Economist, 10. For more than a decade, we have heard passionate arguments from believers in both camps when headline numbers have deviated from their beliefs. The S&P SmallCap 600 reported 20.50%, while the S&P 500 and the S&P MidCap 400 posted 14.37% and 13.50%, respectively. The post-tax average difference in annual performance was 4.2% in favor of index funds.” ~John Bogle, founder of Vanguard, 4. This realization has led to the rise of inexpensive exchange-traded funds and indices.” ~Barry Ritholtz, 12. In addition, only about 12% of the top 100 of managers repeat their performance in the following years. The average investor may not have a very good chance of beating the market. In his view, only 1% of investors have what it takes to pull it off. People place a greater value on things once they have established ownership. Stockbrokers discard the evidence.” ~Andrew Smithers and Stephen Wright, authors of “Valuing Wall Street”, 8. What Is a Retirement Money Market Account? And the percentage of active managers who do beat the market is usually pretty small – fewer than 8% in most of the cases above over the last 15 years; and they may not sustain that performance in the future. And I think that even attempts to pick individual securities is a mistake for people.”, They don’t need to do anything but (invest in a low-cost S&P 500 index fund). They beat the market sometimes, but then they take a hit that wipes out most or all of what they had gained. Value investors like Warren Buffett select undervalued stocks trading at less than their intrinsic book value that have long-term potential. While some of us have the tools—and connections—required to make knowledgeable decisions that will lead us to a portfolio with higher returns, others like stockbrokers, bankers, and big corporations most likely have an advantage, right? His intentions are pure, in other words. After all, a “random walk”–in market terms–suggests that a “blindfolded monkey” would have as much luck selecting a portfolio as a pro.” Amazon.com review of the 10th edition of “Random Walk Down Wall Street.”, Learn more: Ending poverty by 'ending capitalism' is absolute nonsense. That’s the beauty of it.”. And once you have a plan, you need to stick to it, no matter what the circumstances. The broader the index, the less likely the gains incurred from sales as a result of rebalancing ETFs. In a recent Yahoo!Finance interview, Warren Buffett said that 99% of investors should not even attempt to beat the market. You can't even get some asset classes in many and most advisors are sales people, not fiduciaries and just taught how to sell funds," adds Laura. The good thing is many more investors are taking responsibility and interest in their investments. Right off the bat we can eliminate 50 of them who don’t have the time, or the interest to put forth the effort it would take to attempt to beat the market.
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