Dan Solin's Newsletter - June 1, 2017

Look in the mirror. You’re likely an investing genius.

It still galls me when reviewers of my Smartest series of investing books say something like “These books are great for novice investors.” The implication is that sophisticated investors (presumably like those making these comments) can earn higher returns than those following my index-based recommendations.

Many believe “sophisticated” investors include big investment banks, like Goldman Sachs, managers of hedge funds and the polished pundits who appear on television telling viewers where the market is headed or which stocks to buy or sell.

The real genius of these “sophisticated” money operatives is persuading you to let them manage your money because of their “superior” knowledge about investing.

There’s no credible evidence anyone has the expertise to reliably and consistently predict the direction of the market, pick outperforming stocks or select the next “hot” mutual fund manager.

The performance of hedge funds has been dismal. Most actively managed mutual funds underperform their benchmark index every year and especially over the long term. There’s no evidence stock “gurus” have any stock picking ability beyond what you would expect from random chance.

So, who are the real “sophisticated” investors? They’re the ones who invest in a globally diversified portfolio of low management fee index funds. These investors capture the returns of the global marketplace. The odds of a portfolio of index funds outperforming a comparable portfolio of actively managed funds is 90% or higher.

Look in the mirror. You’re likely an investing genius.

Here’s what’s even more important: You’re not going to become a victim of faux “sophisticated” money “experts”, whose only legitimate credential is their skill in persuading you they have an expertise that doesn’t exist.

YouTube Channel

Thanks to all who subscribed to my YouTube channel. I saw a bump in subscriptions, but we still have a long way to go.

If you haven’t subscribed, please:

1. Subscribe to the channel: It only takes a second and there is no cost.

2. Share the YouTube channel link: If each of you shared the link with your social media contacts, we could reach hundreds of thousands of investors.

Recommended Resource

This week’s recommended resource is Abnormal Returns.

Tadas Viskanta is the founder and editor of Abnormal Returns. His website is a rich source of wise advice about personal finance matters.