Wall Street Analyst: Index Funds are the Best Investment

Holy index funds, Batman, look at what I found!

I ran into this piece from USA Today that highlights a new book. 'Confessions of a Wall Street Analyst' by Dan Reingold tells about Reingold's years as a top telecommunications analyst and "takes readers along on his fourteen-year Wall Street escapade — one that left him depressed, contemptuous and, yet, prosperous."

The book gets a bit personal for all of us investors:

Reingold tells his cautionary tale in the hopes of getting a message to the individual stock investor.

"Individuals should not be buying individual stocks," he proclaims. They "should assume that the information and advice they receive regarding individual stocks are stale and, to a large degree, already incorporated in stock prices."

Then he delivers a zinger:

"In my opinion, it's better to buy stock indexes or broad-based mutual funds," he writes.

So, we now have a Wall Street analyst to add to the manager of billions and investment pro who recommend index funds. Seems like the people "in the know" like these funds. And for what it's worth, I like index funds too.

Ok, so someone's going to comment that this is "sour grapes" or some other sort of ploy by this guy to make money selling a book. Nope. He's giving away ALL of the proceeds from the book. If you don't believe me, check out his website.

Comments

[Eric]

He's right. by the time the general public gets any news on stocks, most of the money has already been made and is already incorporated into the price.

[William Tanksley]

I don't agree that individuals can't make money on individual stocks -- there's an advantage in not having a TON of money to move that makes up for not having a ton of information. (When you're moving a LOT of money into a stock, it takes several days to make the purchase, and if you do it too fast or too slowly you spike the price before you can finish.)

HOWEVER, I definitely agree that index funds just make sense as the place to be. Not because indexes are more reliable that a random collection of stock; but rather because they have low manager overhead. I _love_ those low overheads. If the manager's not doing anything for me, doggone it, I'd better not be paying anything for the privledge :-).

-Billy

[Debt Hater]

I've only read good things about index funds and I know I'll start with those.