This really comes down to active investing versus passive investing.
Judgment-based, active investing
It is a mathematical certainty that in each transaction, half of investors will be wrong. Active investing can take up the full day, every day. While it may delay cognitive decline, fewer than 5% of active investors can beat the market over the course of a market cycle (peak to trough to peak).
Rules-based, passive investing
It is a mathematical certainty that passive investors can equal the market minus very small transaction cost, small enough to ignore. Many passive investors spend less than 15 minutes a week on their portfolios. They outperform over 90% of active investors over the course of a market cycle.
Here are some rules:
- Money which we will need within the next 5 years does not belong in the market.
- We need an emergency fund to cover to six months’ worth of household expenses.
- We need to adhere to our personal asset allocation regime.
- The habits of highly effective investors (see below) are really rules.
Rules-based, passive investing can be called no-brainer investing.
We can regain lost money. We cannot regain lost time.
Maximum Efficiency with Minimum Effort is the Monday Morning Millionaire Program objective for members.
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