When trying to understand what sort of investment strategy is best, a lot of people stumble across the “common wisdom” of investing in index funds and then ignoring their account.
I believe that strategy is a cop-out. It’s a patronizing way of saying…
“you’re too stupid to understand investing, the markets, and wealth building so here’s a simpleton’s way of investing”.
Of course, I’m not being completely fair. Index fund investing has some usefulness & is appropriate for some people and some situations.
Like when you’re too uneducated to buy the actual stock you think you are. If you want to buy Twitter but instead buy Tweeter Home Entertainment Group you should be investing in index funds. PS — Twitter was still a private company at the time.
If you think that doesn’t happen very often, shockingly (to me at least) it happened again just this week when Google announced they’d buy Nest. Nest is a private company but that didn’t stop people from buying Nestor.
People who buy the wrong company when the company they want is private and can’t be traded anyways should absolutely be investing in mutual funds.
The Importance of Financial Education
This is why I really believe that a good foundation of financial education is critical for investing properly.
There are many ways to be successful, but by having a strategy to frame your education and to measure you success, you make great strides towards building long-term wealth for your family. It won’t happen overnight, but it will be a very satisfying journey.
What are you doing to improve your financial education? You can start by taking our free 10-part email course & learn how to put your Elephant to work.