- Budgeting
- Cash Management
- Consumer and Mortgage Loans
- Debt and Debt Reduction
- Time Value of Money 1: Present and Future Value
- Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans
- Insurance 1: Basics
- Insurance 2: Life Insurance
- Insurance 3: Health, Long-term Care, and Disability Insurance
- Insurance 4: Auto, Homeowners, and Liability Insurance
- The Home Decision
- The Auto Decision
- Family 1: Money and Marriage
- Family 2: Teaching Children Financial Responsibility
- Family 3: Financing Children’s Education and Missions
- Investments A: Key Lessons of Investing
- Introduction
- Recognize the Ten Principles of Successful Investing
- Principle 1: Know Yourself
- Principle 2: Understand Risk
- Principle 3: Stay Diversified
- Principle 4: Invest Low-Cost and Tax-Efficiently
- Principle 5: Invest for the Long Run
- Principle 6: Use Caution If You Are Investing in Individual Assets
- Principle 7: Monitor Portfolio Performance Against Benchmarks
- Principle 8: Do Not Waste Too Much Time and Energy Trying to Beat the Market
- Principle 9: Invest Only with High-Quality, Licensed, Reputable People and Institutions
- Principle 10: Develop a Good Investment Plan and Follow It Closely
- Lessons Learned
- Understand the Investment Hourglass
- Summary
- Assignments
- Investments B: Key Lessons of Investing
Principle 8: Do Not Waste Too Much Time and Energy Trying to Beat the Market
It is very difficult, expensive, and time-consuming to beat the market (to gain returns in excess of the returns on the major asset classes). While it may be possible to beat the market on a short-term basis, it is very difficult to consistently beat the market on a long-term basis. . You are competing against hundreds of thousands of professional money managers with much more time, money, and access to databases than you have.
If you want to try beating the market, try it for a short period of time and compare your returns after taxes to the benchmarks. However, do not waste too much time and energy trying to beat the market because you will be able to match the market return with little or no effort through no-load, low-fee index mutual funds or exchange traded funds (ETFs).
If you feel you must trade actively, at least trade efficiently in terms of taxes. Trade in tax-deferred or tax-eliminated retirement accounts such as a 401(k), Roth IRA, or traditional IRA accounts. In these accounts, at least your taxes are deferred until you take the money out at retirement.
