Morningstar Index was a reference to the mutual fund indexes published by that company. Most mutual fund companies are able to advertise their good standing in Morningstar’s reports due to confirmation bias, since the losers have closed or folded into successful funds.

2. If you do not manage your money consistently _better_ than a professional over the long term, then you have no rational reason to do it yourself. If you are not doing the math to compare your results those of a professional, then you are wasting your own money and time. You have to include ALL expenses, trading costs, capital gains taxes, and fees. Anything else is cheating (yourself).

3. In my humble opinion, if you’re only making less than or even the same amount of money for yourself as an inexpensive index fund would give you, then (a) great! you have learned something useful, and (b) now you can turn that money over to Vanguard or T.RowePrice, and go out to do something else with your lifetime. Unless you are a fool who enjoys overpaying some moron to steal your money, you would do better 95% of the time with an index fund (see 1). Unless you are or want to become a financial professional, then managing your own money merely to save the 0.2% index fund fee (see 2) means that you are wasting time in your life better spent living. I am not advocating blindly turning your life savings over to some random guy in a suit. Do your homework _first_, invest wisely, then go live your life.

4. This has nothing to do with your brains or your ego. This certainly does not have anything to do with “enjoying” stock trading. If you run the numbers and _honestly_ compare results, then go with what is best for you (and your family, if any). Better yet, have someone else (someone objective like an accountant) run your numbers. In 99.9999% of cases, if you are not a financial professional, then you are wasting your money. If you haven’t run the numbers brutally honestly but still think you are the 0.0001% who beats the experts, then you are probably fooling yourself.

My husband bought a used 91 Toyota pickup. He admitted that it had very little problems for the lack of care he had given it. After about 5 years, he drove it mostly around home because, if he drove over 50-100 miles straight, he would have to put a quart of oil in it. We had it about 9 years. And it was used hard, with going through ditches, mud, and farm land, and with being overloaded a lot with stuff he used keeping the fairgrounds up.

Good arguments on both sides. Just do your homework and take good care of what you get.

You would enjoy reading a book called “How We Decide”, by Jonah Lehrer. It’s a fascinating look at how and why (from a brain-science perspective) we make the decisions we do; one of the chapters discusses this exact thing.

Your post about being a control freak, and how it didn’t help you save money, was incredibly helpful to me – I have the same issue. Your example of the grocery store, in particular, was enlightening.

Thanks for all you do,

Carrie.

This quote strikes me as somewhat rediculous. When you are investing, don’t you want to be an outlier? I know we’re not going for the huge bucks here (as they come with huge risks) but if you have the knowledge to choose consistent stock performers, then you ARE an outlier. Its a skill you have that most people haven’t cultivated. Being an outlier is not always a fluke, and its not always bad. Sometimes its the goal.

Let me say that again: good investors think and act differently than bad ones whether any of them are still around or not.

Todo, I have analyzed stocks professionally in the past, trade my own account today and have a good track record for someone without inside information. I wouldn’t trust my career or my money to copying the behavior of some Morningstar index as you suggest. Respectfully I suggest you research what kinds of money managers are correlated with good performance, and whether any of them might also cause that performance.

Great community you’ve built-

Humans are not often persuaded by logic. We are more frequently persuaded by repetition. The people who make television commercials all know this, of course. But the people who give money advice seem to miss this point.

Why do we believe in buy and hold? And that timing doesn’t work? And that stocks are always best for the long run? Because we have just lived through the most out-of-control bull market in history and those were the marketing slogans that were being repeated over and over and over again.

Once that particular set of marketing slogans bankrupts us yet again (it always has in the past), we will become persuaded by a new set of marketing slogans.

Rationality is rooted in logic. But most money advice is rooted in marketing.

Rob

A good example is looking at the reviews on Amazon with anything of substantial value like a TV, you’ll see reviews like “This is the best TV EVER!”. The reality its that 1) this person did not test every TV out there so they have no way of knowing, 2) if they don’t like it they probably will not post “I made a mistake” to the world.

We all perceive ourselves as being a good judge of value and making correct decisions in our life, Isn’t rationalization wonderful?

Seriously, there is advice out there that will wipe out 100% of investors, advice that will wipe out 80%, 60%, and so on. There’s no advice that makes money for everybody because nothing is right all of the time and not everyone is able to follow the advice.

Katie, Cramer made his wealth from books, TV and TheStreet.com. As a professional investor he made much more money from wrap fees than performance fees. He didn’t get rich from “buy and homework.” Also, I don’t know why you and Trent think conservative advice equals good advice. I have read a lot of bad conservative investing advice.

May God have mercy on our nation for what it’s doing and going through.

I’ve read Cramer, Malkiel, and others on both sides of the aisle. I’m also a stockbroker at an online brokerage firm. I’ve seen plenty of folks prudently navigate their way to above-market returns picking individual stocks and incorporating options, bonds, and ETFs in an effective way. These folks had the time, inclination, and knowledge of the marketplace needed to make this strategy successful.

The point being, indexing is not right for everyone. I’ll agree that loaded mutual funds are a rip, and anyone would be better off indexing than paying a fund manager. And for the average investor, indexing is the way to go when the time is just not there to adequately employ a more selective strategy.

But for those that have the resources and the savvy, indexing should not be a roadblock to better returns, especially in a volatile bear market where index funds got destroyed.

Finally, the guy is pretty darn wealthy, so he must have done something right, even if it was incredibly risky. You don’t have to like him to realize that and to acknowledge that his earlier books are good introductory material to the world of finance.