The On-the-Run Premium on Treasury Securities
Stupidest Man Alive Nomination: Larry Kudlow

Investing for Non-Dummies

Buce of Underbelly writes::

Underbelly: What Would Warren Do? A Valediction: A backward-glance reflection, as the semester winds down. I've enjoyed teaching this class this year (I usually do), but there is one systematic problem. That is: some students come in here every year hoping they'll find out how to get rich investing. And I always have to tell them: look, I don't really know how to get rich investing. Getting rich investing is hard work. Unless you are willing to be disciplined and systematic and pretty much full time (and it probably helps to have a knack), you are better off not trying. Stick to low-cost mutual funds--maybe index funds--with diversified portfolios. This is a game for professionals, and in a game for professionals, amateurs are going to get beat up. Just think of the "outsiders" who win poker championships: they don't just drop through the transom, they have worked and worked and worked to polish their skills. Tastes differ, but my mortgage is paid, and my retirement is (more or less!) secure--I'd rather read a book, or go to the opera.

You don't believe me? Okay, believe Warren Buffett. There's a wonderful new interview with Warren in the current Fortune. Here's the takeaway paragraph:

What advice would you give to someone who is not a professional investor? Where should they put their money?

Well, if they're not going to be an active investor - and very few should try to do that - then they should just stay with index funds. Any low-cost index fund. And they should buy it over time. They're not going to be able to pick the right price and the right time. What they want to do is avoid the wrong price and wrong stock. You just make sure you own a piece of American business, and you don't buy all at one time.


But you're still bullish about the U.S. for the long term?

The American economy is going to do fine. But it won't do fine every year and every week and every month. I mean, if you don't believe that, forget about buying stocks anyway. But it stands to reason. I mean, we get more productive every year, you know. It's a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market.