if someone invests serious money in the stock market and doesn't understand the strategy behind it, they deserve the bad things that happen to them you are basically saying that if someone reads half the rules of a club then gets kicked out for not following the other half, they have grounds to complain -- and that the club should then change its rules based on how those people think you are right about people. most are too stupid to invest in the stock market/trade, but do anyway. you are not right about what that means for the rest of us, or for people building models based on rational behavior. if we build our models based on irrational behavior, we may as well stop building models. i take back my previous comment. you do know what you are talking about. i misunderstood one of the sentences you wrote earlier.
I don't proofread for clarity enough, sorry for that. My issue with the article boils down to his comparison of a spectrum of college results (including stupid decisions) with indexing returns (excluding stupid decisions). - I agree that people are responsible for their own decisions, informed or not. - Some people do stupid things. Many do thinks without proper background research. - A knowledgeable rational index investor will know not to sell after the market drops steeply. - Even with that knowledge, following through is hard. Doubt is a part of human nature, especially when news says "it really is different and worse this time." I think a partially informed investor is more likely to get 2% than 7% if every mention of indexing ignores that the hard part is mental.
makes sense, i think the 'on average' bit is extremely misleading. but i do think it is right to exclude people who screw up on the market; the study is trying to contrast bad and good scenarios. i think the whole thing could boil down to the sentence: "skipping college and investing your pseudo-tuition sometimes will be a better idea than going to college" and the only rebuttal needed is: "if you're going into debt for college, you'll get a loan. if you're going into debt to put money in an index fund, you will not" i mean, i suppose. but there is really only one piece of information in the equation. "do not remove your money." you're implying a second piece of information which gets lost, "sometimes this process will suck." it seems like a rule 2 -- see rule 1 situation to me.My issue with the article boils down to his comparison of a spectrum of college results (including stupid decisions) with indexing returns (excluding stupid decisions).
I think a partially informed investor is more likely to get 2% than 7%