Jonathan’s Parting Thoughts: No. 5

The financial markets are a game where almost everybody is a loser.

Never forget investing’s irrefutable logic: Before costs, we collectively earn whatever the financial markets deliver. After costs, we must—as a group—earn less. In fact, the more we incur in investment costs, the further behind the market averages we’re likely to fall.

That’s why our best bet is to buy low-cost market-tracking index funds, so we earn the markets’ return, minus some small sliver lost to investment costs.

That brings me to one of Wall Street’s most absurd contentions: “It’s a stock picker’s market.” As a group, pickers of stocks will always fall behind the market averages. Indeed, because of their higher costs, their collective results will inevitably be worse than that of those who buy index funds and humbly accept the investment markets’ performance.