Everything has its fashion. Sometimes the S&P is fashionable (stocks in it surge); other times other indices are in the sun. If someone is investing long-term (like 20 years or more) for some sort of retirement goal (having financial freedom), then maybe the person ought to invest in several indices -- small cap value, large cap growth, small cap growth, reit, etc. And so there will be years when the overall portfolio beats the S&P and years when it does not.
Myself, I found this to be perfectly okay and acceptable. Saving and investing consistently over decades - maybe not beating the averages, or maybe only occasionally -- that has how I have grown my portfolio. It's not been a matter of what do I do to beat the S&P or anything or anybody else. Of course, being on this thread and posting on a lot of stocks that I buy -- my ego gets involved here, and I would certainly like to be able to brag that my methodology works great and that I can beat the averages -- Russell 2000, S&P, whatever.
Last couple of years, I've lowered my risk profile (I hold more cash than I ever have, and more preferred stocks/bond funds than previously), and this has contributed to my diminished gains vs. an index like the S&P.
But for most people comparison is valid and important: if they cannot outperform even a crappy index, they should not waste their money and time. :)
I've been interested in the stock market since I was a kid. I enjoy reading about investing and stocks. I find it fascinating. To me, selecting my own stocks is not a waste of my time and I hope not a waste of my money. I'd guess all of us on this thread have this in common. For other people though with other interests, investing with indices or an index may be the way to go (as you and Mr. Buffett suggest) |
