Investing is maybe the only thing in your life where you actually make more money by settling for mediocre and doing as little as possible!
This is completely counter-intuitive but as Mark Twain said,
“Whenever you find yourself on the side of the majority, it is time to pause and reflect.”
The Birth of The Mediocre Investor
The name Mediocre Investor came from something I read in The Elements of Investing by Burton Malkiel and Charles Ellis. They talk about the idea that critics like to call index investing “guaranteed mediocrity.” Mediocrity in the sense that you will never return more than the market. You have resigned yourself to return the market, which according to critics is just “mediocre.” What I love about that the most is that by being mediocre, you actually end up being better than the very people criticizing you!!
I have read A TON about investing. And everything I read brings me back to the same conclusion. Average Sucks! Average is 3.7% over the last 30 years while the market returned 11.1%.
And How does Average Invest it’s money? In Actively Managed Mutual Funds. And most invest in actively managed funds through an advisor. So they are paying there fund manager AND their advisor. This only compounds the suckiness.
Here’s the deal… I was that guy! I was investing through a CFP who was investing my money in actively managed mutual funds. This went on for about 5 years and everything seemed great!
Until I started reading!!
The first thing I read was Little Book on Common Sense Investing by John Bogle. This began to change everything for me. I kept reading and the more I read the more I questioned everything I was doing. I saw the numbers, I looked at the data and then I looked at my portfolio. And I could see exactly what John Bogle, Warren Buffett and so many others talk about. Costs were KILLING ME!
I began to be more and more open with my advisor about this: I was paying 1.25% for advice at the time and my average expense ratio was somewhere around 1%. This meant I had to return 2.25% ABOVE THE MARKET in order to MEET THE MARKET.
Was I, you ask? (You already know the answer.)
Of course not!!! As Burton Malkiel says, trying to beat the market “is like looking for a needle in a haystack.”
So I began managing my own money and started The Mediocre Investor to help people achieve the same things I have. Stop Throwing Away Money and Start taking control of their own financial future!
What This Looks Like For Most People
For most people this will look like getting a low fee-only Registered Investment Advisor. These people have a fiduciary (legal) responsibility to act in your best interest. They charge much lower fees than your typical broker/dealer advisor would and the funds they advise will have much lower fees as well.
The reason I suggest a RIA is that the vast majority of people need help managing their fear when it comes to investing. Education is important and we will provide a ton of education here. But education is not the only thing you need.
In ‘Your Money and Your Brain’ by Jason Zweig he talks about the idea in behavioral finance that when you are losing money in the market and you open your statement and see a loss, you process that in the same part of your brain as you do mortal danger. Now, if that is true and we view losses as mortal danger to us, it follows that we would do whatever we can to prevent that mortal danger from happening. (shout out to Carl Richards for shaping some of my thinking on this)
With investing, what we do is sell! And this is the very thing we should not do! Even if we know this, our brain is so powerful it can trump reason and logic every single time.
Now there are some people who can look a 20% market decline in the face and laugh, remembering the truth. But for the majority of people, selling becomes too much of a temptation to overcome. Especially when they read and hear the gloom and doom on the news or CNBC.
This is where a fee-only RIA comes in. They can help be the barrier, punching bag, whatever, between you and that sell button.
So my advice is to find a good fee-only RIA in your area and let them help you meet your goals through low cost passive investing while also helping you steer clear of ‘Mortal Danger Syndrome.’
Who Am I
Hi! I’m Brock.
I am a CPA who lives just outside of Indianapolis, IN.
I am husband and father of 3 children under the age of 5! (You can cry for me now if you want to :))
My mentor is John Bogle. He has been trying to get the word out about passive investing for a very, very long time! I hope I am able to do him proud in everything we do here!
I love to read and be outdoors.
I am a Boglehead. If you don’t know what that is check out Bogleheads.org.
My Contact Information
You can email me at email@example.com. You can also follow me on Twitter.
We write about investing! Wasn’t it obvious? 🙂
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