Investing does not need to be complicated. In fact, after reading this post, you will have enough information to get started and invest more efficiently than almost every other casual investor. For basic investing, simple index funds will give you broad diversification and returns that will match the overall market. In addition, low fees and low turnover minimize taxes and expenses that can decrease your gains over time.
In the long term, economic theory suggests individuals will not beat the market when risk is considered. This idea stems from academic research developed at Princeton and MIT and is often referred to as efficient market theory. In addition, past performance does not predict future performance. Take a look at the companies who debuted on the S&P and see how many still exist. Broad based index funds take into consideration the rise and fall of individual companies, and position themselves to mimic the entire economy as a whole.
If you really want detailed guidance you can read the single best book on investing: A Random Walk Down Wall Street by Malkiel. The book is quite old but is updated every few years. Buy an older copy because the investing principles do not change. It can be a bit tedious, especially to non-investors, but the concepts are timeless and backed by more actual academic research than any other popular investment book. Continue reading The Simple Economist’s Guide To Investing