What’s next? (asks an investment firm)

Here’s an investment firm’s commercial — I have highlighted the key part:

Why do people invest?
They invest for what’s next.
That could be a college dream, a new priority, an active retirement.
Whatever next is, it takes smart investments managed by experts who actively spot risks and opportunities.
[Name of firm] has been doing that for over 65 years, helping millions of investors achieve what’s next.

For a minute, consider what I recommend — the opposite of that firm’s alleged strategy:

  • Smart investments? No, I recommend stupid investments, just index funds that hold  essentially every stock.
  • Managed by experts? No, I recommend funds that instead aren’t managed at all, since they hold everything and only do minor adjustments to stay in balance.
  •  Who actively spot risks and opportunities? No, I recommend not even trying to spot opportunities, neither trying to sell bad stocks on the way down or to buy into promising stocks on the way up.

And the result: My recommended stupid passive management strategy brought a ten-year return of 8.10 percent (in my favorite total stock market index fund). Go over to that other firm’s site — the one with the active experts — and you’ll see: They found it hard to beat a stupid passive strategy. But don’t be too hard on that firm. Its competitors fell short of the indexes more than half of the time, too.

The bottom line? Buy and hold index funds.