Part-Time Investing

As many of you know, I'm an indexing investor. I've written about it on several occasions including the following:

• Where the Pros Stash Their Own Dough, Part 1
• The Case for Indexing
• Don't Give Up on Index Funds Yet
• Do You Have Enough Time to Invest Like You Want To?

I recently found another piece from the Motley Fool that details the benefits of index investing. Here's what it says:

There's a trade off all investors have to make. On one hand, we know that the market can be beaten, as it has been by masters like Warren Buffett and his tutor, Benjamin Graham. On the other hand, it takes a lot of work to research, analyze, value, and buy companies trading at the right prices to potentially beat the market. It can be a full-time job and then some. Worse yet, even if you're eventually proved correct, the old saying attributed to John Maynard Keynes, "The market can remain irrational longer than you can remain solvent," is as true today as it was back then.

With all the effort that it takes to beat the market, many investors are simply better off following an indexing strategy. It's a great, low-impact strategy, and for 90% of current and potential investors, it really is the best way to build wealth over time.

Exactly. This is exactly why I invest using index funds -- it fits the time I have (little) to research investments and it gives the best returns in the vast majority of cases. Yes, you can name a handful of people who do better than the market, but you can name a ba-zillion more who do worse.

Unfortunately, the Fool, as it's prone to do with its often hype-filled pieces, then goes on to offer a way to beat the market (Like they know how. If they did, they'd spend all their time investing -- not running a website.) Their take:

While indexing is great for the vast majority of investors, it simply cannot beat its benchmarks over the long haul. If you want to be one of the 10% who has a legitimate chance of doing that, then you have some work to do. It's up to you to determine how much of your time you're willing to put toward the effort. The learning curve can be both steep and expensive to climb on your own.

You can click through to the link to read the rest if you like. Personally, I don't think the rest of it is worth the web page it's printed on. But, that's their schtick -- hyping one stock after another and selling their stock-picking service in the meantime.

I'm sticking with indexing and will recommend it to anyone who asks me for an opinion. Check out the links at the top of this entry if you need more information and how it can work for you.

Free Money Finance recommends Emigrant Direct for its 4.0% yield.

Comments

[Jesse]

You can catch a pretty academic look at the case for passive (index) investing here:

http://www.youneedabudget.com/blog/2004/the-inefficient-markets-argument-for-passive-investing/

I enjoyed the read!

[JCG]

I remember the day when the Motley Fool used to actually have unbiased anti-establishment investment advice, then they sold out and are now just hucksters for their newsletters... o'well...

I really believe exchange traded funds are the greatest thing to happen to individual investors since low cost mutual funds came out. I am actually writing a series on Sharebuilder on my blog which is a pretty good vehicle for building a portfolio using this indexing philosophy.