I'm Too Risk-Averse for Index Investing
paranoidvalueinvestor.substack.com
I'm Too Risk-Averse for Index Investing
1–10 of 286 posts
Re: I'm Too Risk-Averse for Index Investing
#2Buying value stocks may be better than buying an index, but identifying value stocks is hard and time consuming. Wouldn't the average investor be better off buying index funds, since the average investor does not have the time, inclination, or training to find value stocks?
Re: I'm Too Risk-Averse for Index Investing
#3Averse. It's risk averse.
Re: I'm Too Risk-Averse for Index Investing
#4Buying value stocks may be better than buying an index, but identifying value stocks is hard and time consuming. Wouldn't the average investor be better off buying index funds, since the average investor does not have the time, inclination, or training to find value stocks?
You can always just let someone else do the research and buy shares of Berkshire Hathaway
Re: I'm Too Risk-Averse for Index Investing
#5Makes you wonder why the 89% of fund managers that fail to beat the market don't just pick "value" stocks.
Re: I'm Too Risk-Averse for Index Investing
#6Buying value stocks may be better than buying an index, but identifying value stocks is hard and time consuming. Wouldn't the average investor be better off buying index funds, since the average investor does not have the time, inclination, or training to find value stocks?
I believe indexes protect me from my own lack of knowledge on market operations and analysis. I have a couple of investments in indexed funds and of course I do not expect them to be resilient to bubbles or crashes.
If what the FA says was true everyone would be doing this "value investing". It's about how you balance risk vs benefits.
Re: I'm Too Risk-Averse for Index Investing
#7Shouldn’t we look at net return indices when talking about recovering?
Re: I'm Too Risk-Averse for Index Investing
#8Buying value stocks may be better than buying an index, but identifying value stocks is hard and time consuming. Wouldn't the average investor be better off buying index funds, since the average investor does not have the time, inclination, or training to find value stocks?
All completely true. The average investor should probably be using a financial advisor.
One of the biggest reasons that most of these funds work is the volume of people in the US with 401k plans that have fund-only options. Every pay period the stocks in these funds get automatically purchased without many decisions involved so you're going to continue seeing them steadily and safely increase.
Ultimately, investing boils down to finding something where you're comfortable. 401k investing makes people comfortable because of all the pre-tax benefits. Even if you make bad picks, you're still making the percentage of income tax every single time.
A lot of people invest directly in real estate or franchise businesses. Others in big, safe, dividend payers. Some people buy timber land.
IMO it's just going to be comfort level and experience.
Re: I'm Too Risk-Averse for Index Investing
#9One thing missing from the analysis is that many index funds pay dividends. So even if your country is having a rough decade, fund holders are getting paid the whole time. Additionally index funds are tax efficient with low management costs so that has to be considered when comparing to individual stocks as well.
More saliently, (1) it’s hard to identify value stocks and (2) the time frames he was looking at are not that long. I feel fairly confident that markets will be way up in 50 years if for no reason other than technological progress
Re: I'm Too Risk-Averse for Index Investing
#10Buying value stocks may be better than buying an index, but identifying value stocks is hard and time consuming. Wouldn't the average investor be better off buying index funds, since the average investor does not have the time, inclination, or training to find value stocks?
There are value index funds. Vanguards is VTV