Every business leader, economist and diplomat on the planet, as well as any serious investor reads The Economist. This venerable publication supports a great deal of the Monday Morning Millionaire Program position on investing.
It would be useful to draw attention to the relevant sections of the article titled “Balancing act” that appeared in the Finance and economics section of the July 28, 2018 issue. Credibility for the Monday Morning Millionaire Program!
The article mentions Benjamin Graham, Warren Buffet’s mentor and role model. Graham is the father of the idea of value investing, that is, picking stocks that are undervalued. He is also the father of passive investing which is advocated by the Monday Morning Millionaire Program. Yes, he did see room for both active and passive investing styles and described them in his book “The Intelligent Investor”.
The benefits of active investing are that it can be satisfying for investors interested in spending the hours and hours required. It also is the only way to beat the market. The best that passive investors can do is to equal the market minus very low transaction costs. All passive investors will do so. On the other hand, the academic literature has many papers showing that over 90% of active investors will fail to do so over the course of a decade. Most will underperform significantly.
This is a good place to review the seven habits of highly effective investors.
- Having an early, disciplined savings program
- Self-directed (do-it-yourself) investing
- Buying the entire US market
- Buying and holding
- Buying low, selling high
- Having cash most of the time
- Avoiding complexity
Decades ago, many active investors and academics observed that most securities were underperforming the market indices. By allowing investors to get exposure to the entire market as if they are buying a single stock, low-cost indexed funds have made it easy to invest safely and competently.
Combined with the rebalancing to the individual investor’s personally selected asset allocation, The Economist article shows that the Monday Morning Millionaire Program approach to investing indeed observes six of the seven habits of highly effective investors and yields comforting results. Investors only need to begin a disciplined savings program early in their careers.