Here’s a great video by The Sensible Investor, that starts out explaining the “retail” world of investing that most people are familiar with … because that’s where most people start investing.
Here are a couple links to skip to a couple of key summary points (I encourage you to take the time to watch the whole video though …)
This link skips the critique of actively managed funds and starts with a summary and goes into explaining passive investing structures (you are free to start at the beginning at anytime). This link jumps to a passive summary about how stress may be reduced and life enjoyed more by a pragmatic approach to the markets.
Here are other blogs describing the passive approach. What is that? In the simplest terms, it is buying the market through an indexed approach.
When you combine stocks and bonds and any other kind of investment, you get Standard Deviation and Expected Return combination. Most combinations are below, or less efficient than an efficient, optimized, mix that fall within the Efficient Frontier range (see the PowerPoint below).
Moral of the story:
When it comes to important goals, such as retirement for example – which is the most important goal most of us have I would argue, I believe a sensible, prudent and logical approach to managing your money in today’s world is important. This video does an excellent job explaining how to structure investing sensibly. Why take on more risk or gamble when you really don’t need to?
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PS. Here’s a blog I posted on the pros and cons of different styles of investing approaches.