Here’s the bottom line about investing, straight from Fortune Magazine’s 10 Rules for Building Wealth: “Even the best fund managers have trouble beating the S&P 500, so give up the chase.”
If the professionals — people who spend hours each day studying the markets — can’t do it consistently, why do you think you can? Sure, there are success stories, but they are anecdotes, not true representations of what trading in the stock market is really like. Survivorship bias also shows that we’ll hear about success stories much more often than we’ll hear about failures, leading towards more misunderstanding of the way markets work.
Matching the market does not mean you’ll receive average returns. Considering most fund managers don’t beat indexed mutual funds, matching the market will exceed the average.
Fortune says, “The most straightforward way to avoid this trap is to diversify your assets and then rebalance your portfolio at least once a year.”
I’ve written about diversification and rebalancing quite a bit in the past. Here are some professional individuals who have done so as well:
* Article: Stress-Free Investing in Four Easy Steps, by Erin Burt
* Book: The Boglehead’s Guide to Investing, by Larimore, Lindauer, and LeBoeuf (my review)
* Book: The Smartest Investment Book You’ll Ever Read, by Daniel R. Solin (my review)
It was actually two weeks ago that I posed the question about the “biggest weakness” question that we’ve all experienced in some form in job interviews. Some great responses followed, and one was randomly selected to win my copy of The Smartest Investment Book You’ll Ever Read, which I reviewed earlier this month. Here’s a few selected anecdotes provided by readers:
Kira said:
When I interviewed for my current job, I thought everything went really well – we seemed to all hit it off and they seemed impressed by my qualifications. Right off the bat, everyone assumed I was a whiz with computers and math (somewhat yes, completely no) – my supervisor told me recently that they assumed I had those qualifications, though we didn’t talk about them at any length in the interview, because I wore white socks with black shoes and therefore I must be a geek.
Jeremy was asked the dreaded question:
I ended up saying one of my biggest weaknesses was the fact that I have trouble delegating work. I can have a hard time letting go of control over every aspect of a project, thus I end up doing a lot of mundane tasks that eat up time that could be better spent doing more appropriate tasks.
The winner of the giveaway, samerwriter, was on the other side of the conference room table:
We’re always told to ask this question (or similar “behavioral” questions) when we interview potential employees. I don’t like them, for the reasons you mentioned. You really wind up testing someone’s interview skills rather than their job skills. Other examples of this type of question are “Give me an example of a time when you failed.” But what you’re looking for, and you don’t need to be a psychologist for this, is someone who recognizes that they aren’t perfect.
Here are the rest of the comments.
