Jonathan Clements and the Nine Commandments-Number 8

Reassuring investment advice--

8--We all tend to think we're better than average drivers, pretty good looking and smarter than most.  This overconfidence spills over into our investing and fuels our headlong pursuit of market-beating returns. 

Yet this is almost always self-defeating.  Trying to beat the market typically involves a heap of investment costs, and those costs mean our efforts to beat the market usually fails miserably.  Indeed, you will probably fare far better by sitting quietly with a handful of low-cost mutual funds, preferably market-tracking index funds.

But it isn't just that efforts to beat the market are usually self-defeating.  They are also unnecessary.  Want to retire rich?  All it takes is time and regular savings.

I told you finance was easy.  Set it and forget it. 

A major foe, if not the major foe, of making money is expenses.  Also, known as transaction costs.  The more you trade, the more you use a broker, the more you use load funds, the more you use no load funds with high fees, the more you LOSE.  Activity requires effort and the broker, banker and candle stick maker all require payment.  You, the customer, pays.

On the other hand, index funds do not require a lot of effort on the part of the fund company so they have the lowest expense ratios.  Finally, you have the guy ingredient that makes investing in low cost funds-TIME. 

Use TIME and dollar cost averaging (regular contributions) to make you rich.  Check out Category 12 for details.