| Practically everybody attempts to beat the | | | | simpler than that. Consider that the return of the |
| market at some point in their investing career. | | | | actual un-managed index (the index itself, not the |
| Sadly, only a tiny minority will succeed. Even | | | | fund tracking it) is the average weighted return of |
| worse for most, the very act of trying to beat | | | | every investor in the market, large and small. |
| the market virtually guarantees they will | | | | Now consider that the average INVESTOR'S |
| under-perform due to the drag of transaction | | | | return is simply the return of the un-managed |
| costs and taxes. Stock picking rarely works, | | | | index minus the transaction costs and other |
| market timing is even less effective, and | | | | expenses required to get that return. |
| momentum investing is nothing more than | | | | So far so good. As you may know, index funds |
| gambling. | | | | are by far the cheapest type of mutual fund to |
| But what if I told you there was a way for you | | | | own because there is no need to hire expensive |
| to earn above-average returns with virtually no | | | | analysts to do stock research. Therefore, since |
| effort? It's possible, but it's probably not what | | | | the average investor earns the return of the |
| you think: index funds. No, that wasn't a typo. | | | | index minus expenses, anybody with |
| Most people are under the false impression that | | | | below-average expenses has an enormous |
| investing in index funds is settling for average | | | | advantage versus those with above-average |
| performance when nothing could be further from | | | | expenses. And if those investors own index |
| the truth. In fact, index funds must | | | | funds, they are mathematically guaranteed to |
| mathematically earn above-average returns over | | | | earn at least in the top 50th percentile since there |
| time. | | | | is no tracking error with index funds: the return |
| To most, the concept that the average market | | | | you get is merely the index minus the fund's tiny |
| return could in fact be above-average is | | | | expense ratio. |
| counter-intuitive. How could this be? Well, it's | | | | And there you have it: invest in index funds and |
| simple. For starters, it's widely reported that 80% | | | | you will beat most of the competition, if not the |
| of mutual funds fail to beat the market and this | | | | market. |
| should be your first clue but it's actually much | | | | |