Investors are stupid and you don’t want to be one of the stupid ones

Most investors are quite stupid. They would believe advisers who paint them beautiful pictures of fund performance, even though they know 90% of actively managed funds will not beat the market.

Investors buy instruments randomly.

On a normal day, a good looking agent chats up a retiree and within the same day, the retiree would commit all the savings into this plan. We have seen it far too many times.

Investors are also forgetful.

They forget that actively managed funds charge 1.5% to 3% of fees per year. A passive index fund can be as cheap as 0.5%. But they believe their fund managers can overcome the fees can bring in profit that exceeds market returns. Many agents don’t always tell you the total expense ratio and when you commit, this is akin to robbing for me.

This is why the fund management industry exists. Salesman can always do sweet talking well.

My advice, read simple truths.

Find out what John Bogle and Benjamin Graham says, not what the average investment adviser says.