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Cheap passive funds are good advice if you want to maximize your return in the most frequent outcomes, but it ignores some powerful psychological stuff that's real and in play.

An index fund is like a bus: everyone is going to the same place, and you're not driving. Many investors just can't deal with that, and may rationally and happily take bigger risks seeking excess returns, even if they know the odds are against them.




Most investors I know, even beginners, believe they can beat the market with minimal effort and essentially zero knowledge about it. The usual results are, however:

http://www.businessinsider.com/forgetful-investors-performed...


That's a good point, though I would think you can handle a lot of that with the macro asset allocation (shares, bonds, alternative; domestic, international; etc.), which is still something one needs to do and look at every year or so.


The name of the game is proper risk management and a lot of work to find and setup a winning strategy that will work for you...




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