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Friday, September 2, 2011

Quote on Indexed Investing

One of the 3 or 4 books I recommend to those serious about learning investing is Your Money and Your Brain by Jason Zweig.  This is a book that will change the way you look at investing.  It is the single best intro to leading-edge research on the field of "neroeconomics" which carries out experimental research to understand how financial decisions are made.  It came to mind after reading the quote by Jason Zweig presented below.  I sheepishly discovered that I had not listed the book in my bookstore (link to the right) but have since added it.

I came across the quote when reading a piece entitled "How to Manage Your Investment Anxiety" by MarketRiders, an online portfolio management service.  The service is well worth considering for DIY investors and offers excellent free educational materials.

This is what Jason Zweig said about indexed investing:

Indexing enables you to say seven magic words: “I don’t know, and I don’t care.”
Will value stocks do better than growth stocks? I don’t know, and I don’t care – my index fund owns both. Will health care stocks be the best bet for the next 20 years? I don’t know, and I don’t care – my index fund owns them. What’s the next Microsoft? I don’t know, and I don’t care – as soon as it’s big enough to own, my index fund will have it, and I’ll go along for the ride.
Indexing enables me to say, “I don’t know, and I don’t care,” liberating me from the feeling that I need to forecast what the market is about to do. That gives me more time and mental energy for the important things in life, like playing with my kids and working in my garden.
MarketRiders goes on to point out that you can control the allocation of assets but not how the overall market will perform or how individual sectors will perform.  Focusing on what can be controlled frees up the investor from anxiety over what can't be controlled.

Well worth thinking about as we navigate today's volatile markets.

1 comment:

  1. Very nice way of looking at indexing! Combine that with a lazy portfolio, you WILL spend more time with your family!