How person thinks about investing

I do not know how I did as a stock picker. Did I neat the market? I am not sure. Like most who try, I did not keep a good score. Either way, I have shifted my views and now every stock we one is a low cost index fund.

I do not have anything against actively picking stocks, either on your own or through giving your money t an active fund manager. I think some people can out preform the market averages, it is just very hard and harder than most people think.

If I had to summarize my views on investing, it tis this, every investor should pick a strategy that has the highest odds of successfully meeting their goals. And I think for most investors, dollar cost averaging into a low cost index fund will provide the highest odds of long term success.

That does not mean index investing will always work. It does not mean it is for everyone. And it does not mean active stock picking is doomed to fail, In general, this industry has become too entrenched on one side or the other, particularly those vehemently against active investing.

Beating the market should be hard, the odds of success should be low. If they were not, everyone would do it and if everyone did it there would be no opportunity. So no one should; be surprised that the majority of those trying to beat the market fail to do so.

I know people who think it is insane to try to beat the market but encourage their kids to reach for the starts and try to become professional athletes. To each their own. Life is about playing the odds and we all think about odds a little differently.

Over the years I came around to the view that we all have a high chance of meeting all of our family’s financial goals if we consistently invest money into a low cost index fund for decades on end, leaving the money alone to compound. A lot of this view comes from our lifestyle of frugal sending. If you can meet all your goals without having to tale the added risk that comes from trying to outperform the market, then what is the point of even trying? I can afford to not be the greatest investor in the world, but I cannot afford to be a bad one. When I think of that way, the choice to buy the index and hold on is a no brainer for us. I know not everyone will agree with that logic, especially my friends whose job it is to beat the market. I respect what they do. But this is what works for us.

We invest money from every paycheck into these index funds, a combination of US and international stock. There is no set goal, it is just whatever is left over after we spend. We max out retirement accounts in the same funds and contribute to our kids” 529 college savings plans.

And this about it. Effectively all of our net worth is a house, a checking account and some Vanguard index funds.

It does not need to be more complicated than that for us. I like it simple. One of my deeply held investing beliefs is that there is little correlation between investment effort and investment results. The reason is because the world is driven by tails, a few variables account for the majority of return. No matter how hard on try at investing you would not do well if you miss the two or three things that move the needle in your strategy. The reverse is true. Simple investment strategies can work great as long as they capture the few things that are important to that strategy’s success. My investing strategy doesn’t rely on pricing the right sector or trimming the next recession. It relies on high savings rate, patience and optimism that the global economy will create value over the next several decade. I spend virtually all of my investing effort thinking about those three things, especially the first two which I can control.

I have changed my investment strategy n the past. So of course there is chance, I will change it in the future.

No matter how we save or invest I am sure we will always have the goal of independence and we will always do whatever maximizes for sleeping well at night.

We think it is the ultimate goal, the mystery of the psychology of money.

But to each their known. No one is crazy