The Index Card: Why Personal Finance Doesn't Have to Be Complicated

by Helaine Olen

“Trying to pick a winning money manager is even more of a losing game than trying to pick a winning stock.”

Alternative investments tend to be highly subject to trends, manias, and erratic or dramatic price swings. They bring unpredictability into your life. You don’t need that.

You might believe that you are a calm and rational investor. But when we invest in individual stocks, we are not engaging—no matter what we think—in prudent, reasonable investments. We are speculating. You may be researching your stocks and investing with caution and care. It doesn’t matter. No matter what the financial services industry would like you to believe, most of the time you are a more respectable version of someone playing poker or craps in Vegas.

Your time is valuable. Your happiness and economic security depend on your marriage, your family, your success at work and in your relationships. Investments in those areas are almost certain to pay off.

being more educated or having more letters or credentials after your name or having the important-sounding job of managing a mutual fund doesn’t make anyone more immune from the pitfalls and pratfalls of investing.

Research has repeatedly shown that less than 1 percent of actively managed funds were able to beat the index they were set up to surpass when trading and other expenses were taken into account.

When you invest your hard-earned money in a mutual fund or any investment for that matter, it’s not a freebie, no matter what financial salespeople claim.

the first rule of investing: Past performance is no guarantee of future returns.

“If it’s free, you are the product.”