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  • The part you’re missing is that index funds do not bring “mediocre results.” They bring the absolute BEST results for most casual investors over the long term when factoring in trading and management fees.

  • When investing, you want goal to either met or exceed the performance of the index. Investing in an index gives you diversification and is more cost efficient than individually buying the stocks that make up the index.

    You’d be surprised how hard it is to individually pick stocks that allow you to be diversified and beat an index. For instance, one stat I’ve heard is that only 3/10 mutual funds beat their index. Mutual funds are actively trading everyday and they miss the mark.

  • Wow, I’m not sure where you’re getting your information from but whoever told you that is completely wrong. From my own person portfolio, I have a couple of index funds with Vanguard, Schwab & fidelity. Fidelity’s 500 index fund has averaged just under 15% annual returns since the funds inception. They provide diversification. You have greater risk when buying a single stock. Plus 97% of stock pickers fail to outperform the market. Keep your investments simple. Index funds are cheap and have been proven to work. Research what Warren Buffet has said about them.

  • I have 10 ETFs with an average total return of 4.65% with my highest performing ETF up 13.90%. Since I’m a full-time student, not having to worry about my positions is what eventually led me to ETFs.

  • In aggregate, actively managed funds have historically failed to beat the market after accounting for fees.

    You want to trade individual stocks, go for it. Higher expected return but higher potential loss (risk). Everyone has a different risk tolerance.

  • Long-term risk-adjusted returns favor index funds over picking “obviously good” stocks. Yes, there are quant risk modelers that consistently outperform the indexes for decades but people with those skills wouldn’t ask this question. If good stocks were actually obvious, everyone would already own them.

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    Unless you’ve significantly outperformed the S&P500 every single year for a decade or something like that, the most likely explanation of stock-picking performance is luck.

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