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February 9, 2004:
Why A Lazy Investor Is A Successful Investor
Interview
with Paul Farrell, author of The
Lazy Person's Guide To Investing
Mike
Carruthers:
When it comes to investing who should be buying individual stocks?
Paul
Farrell:
Individual stocks, frankly, I don't think anybody should be
buying individual stocks.
Paul Farrell
columnist for CBS market watch, and author of the book The
Lazy Person's Guide To Investing, says for most people...
Simply
buying the market, being content with being average, and sticking
with low cost index funds and what I call a lazy portfolio that's
the primary way to win in the market.
Most people
who claim to beat the market says Paul simply don't because
they fail to take in to account commissions, taxes, and other
expenses. In fact a study was done by a couple of professors
at the University of California at Davis.
These
two guys studied 66,400 portfolios, the bottom line of their
conclusion, the headline, was the more you trade the less you
earn.
And listen
to this, another study over a nineteen-year period showed that...
The average
equity investor earned a paltry 2.6% annually compared to yearly
inflation rate of 3.1% and the 12.2% for the SNP 500 index earned
over the past nineteen years. That's really abominable.
So Paul's
advise...
Probably
the simplest way is just to put their money into a well-diversified
portfolio of low cost index funds, period.
At somethingyoushouldknow.net,
I'm Mike Carruthers and that's Something You Should Know.
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