After stripping away all the noise, a few simple truths about emerge. We know that chasing funds with a hot track record is a losing game. We’ve seen that even the best advice only works some of the time, and we know that high costs are a guaranteed drag on your returns.
Trying to pick winning investment funds feels a lot like searching for a needle in a haystack. And if you try to pick them based on recent hot performance, you’re more likely to end up disappointed than successful. It's a common challenge for anyone new to . So, it’s natural to think, why not just hire a professional?
When you're first getting started with , there's a tempting and seemingly logical strategy for picking mutual funds: just choose the ones that have been doing the best lately. It makes sense, right? We’re drawn to winners. This is why a huge amount of investor cash—over 150 percent of net flow in 2016—pours into funds with a four or five-star rating from Morningstar.
When it comes to , almost everyone—from financial advisors to the media—points to a fund’s past performance as the key indicator of success. We’re taught to look at the track record to predict future results. But deep down, we know that performance is fickle; it comes and goes. This is a crucial lesson for anyone .
How do you get ahead in the world of investing? The answer is surprisingly simple: buy a slice of every business in the United States and then just hold on to it. This straightforward concept is the key to winning a game that most other investors are almost guaranteed to lose. For anyone exploring , it’s important not to mistake simplicity for a lack of sophistication. It’s a principle that has stood the test of time.
Every successful company has a plan with clear short- and long-term goals. If you want to achieve financial success, especially when you're , you need one, too. The first step is figuring out where you stand financially today. From there, you can decide what you want for your future and map out exactly how you'll get there.
After spending my career in behavioral finance, I’ve learned that how I invest my own money is either incredibly straightforward or deeply complex, depending on how you look at it. But my entire approach starts with a single idea: money is always a servant, never a master. For anyone wondering , I believe the first step is to ask a more fundamental question: why are you even saving in the first place?
My childhood home wasn't one of excess. We were on the free lunch program at school, and I have clear memories of huddling around a space heater on cold mornings. This was pretty normal for my neighborhood, so it never felt strange. But we were lucky—our needs were always met, and my parents often gave what little we had to spare to families who had even less. They instilled in me the importance of caring for others, a value I admire more and more as I get older.
My real education in finance came from two people: my father and my first boss, David Swensen. My dad lost his parents young and had to put himself through college and medical school with very little. When some family friends passed, they told him about stocks, and he bought IBM in 1959. Even when life felt like it was taking everything from him, he held onto those shares. He still has them.