Usually being considered a Pro takes an incredible amount of sacrifice, training, and perseverance, not to mention having some talent in the first place. We see the fruits of such labor everyday in the sports, business, and entertainment worlds. To be a “Professional” means you have crafted your skill to be among the best. If you have a career, you owe it to yourself (not to mention your boss and employer) to up your game and reach “Professional” status. Everyone – You, Your Boss, and Your Company – benefits when you are at the top of your game, so handle your business like a PRO!
But if you’re busy working on being a Pro in your career or maybe even your own business or side hustle, how can you also dedicate precious time to handling your investment money like a Pro in order to maximize your investment returns? The secret is that you don’t need to be a “Pro” at investing to get healthy returns like one. You can be average instead and still get healthy returns like a Pro without worrying about learning how to pick the hottest stocks, read financial statements, or perfectly time your stock trade entries and exits. You can sit pretty with your average investing self instead while the Pros try to beat each other! Here’s why.
You Probably Will Not Be Able to Beat The Average, Much Less the Pros
So don’t bother trying. When I say “beat the average” here, I’m talking about the average performance (return) of all companies within a benchmark index such as the S&P 500. Funds that track an index, aptly called “Index Funds”, represent the performance of the market that they are tracking through a selection of representative companies. In order to beat that selection of representative companies, you have to figure out which companies will perform BETTER than their collective peers. Do you know how to do that beyond the hottest stock tip that you heard from your cousin? Neither do I, and I have tried. I literally tried to go Pro this year by trading GoPro (Ticker: GPRO) and let’s just say it did not work out too well in the end. Sure, there was a point when I was up by about 10% in a very short period of time, but the greed in me took over, I held onto the trade too long, and I dearly paid the price. I am convinced that I am not a Pro, and while a smaller portion of my funds may be dedicated to holding individual stocks for the long haul going forward, I will now take the lazy route with the bulk of my investment funds instead of trying to beat the market all by myself.
A Pro Will Probably Not Help You Beat The Average Either
Well if you can’t beat the Pros, join the Pros right? Better off not joining them usually. Historically, even the Pros’ Funds (actively managed mutual funds) have usually not performed better than Index Funds which simply try to match what the market is doing. According to Barron’s, actively managed mutual funds have under-performed the market in 22 of the past 26 years, although many Mutual Funds have been doing better than their benchmarks during the second half of this year. The main reason that Pros’ funds usually aren’t delivering better returns than what you could get from an Index Fund is due to the fees that they charge for trying to beat the market. And this is where it gets rather funny – Even if a Pro does beat their benchmark’s performance, once you factor in their fees for doing so, you are still likely to have a worse performance than you would have had with a lower cost Index Fund. With fees factored in, Index Funds’ performances have been historically better than Actively Managed Funds. If what the Pros are delivering by way of actively managed funds isn’t better than what you could get on your own through a passively managed Index Fund, why even bother with the Pros? In the end, the Pros are winning by (sometimes) beating the market but passing on the costs of doing so to you!
How to Be Lazy, Strive For Average, and Still Perform Like A Pro
So if you probably won’t be able to beat the Pros on your own, and the Pros will not deliver you returns that are better than market averages, then there is only one alternative left: Be lazy, strive for average. The good news with this strategy is that you will probably perform as well or better than what the Pros could do for you, while sitting pretty and being lazy at the same time. My friends, I’ve just introduced you to the world of passive (lazy) investing! Be satisfied with what the market gives you and you will come out looking like a pro years from now. Here’s how:
Invest in Index Funds or Index ETFs (Exchange Traded Funds) that simply track the market: Why? These funds have usually very low fees, so you get the market’s performance with very little cost compared to what the Pros would charge you. Example of an index ETF that tracks the broader stock market: Vangaurd’s Total Stock Market ETF (Ticker: VTI).
Be Consistent: Trying to pick the perfect time to get into the market is a fool’s game. The chart below from Business Insider shows why. Instead of trying to determine when is the best time to put more money into the market, why not set up periodic transfers to your brokerage account and purchase more shares every time new money arrives? This is lazy, and it works.
If you want to be even more lazy, you could automate the whole process: Robo-Advisors – companies that will automatically invest your money into index funds and decide the best allocation of your money based on their algorithms and your risk tolerance – are the ultimate lazy man’s tool to investing like a Pro. Just set up monthly transfers, tell the Robo Advisor your risk tolerance and time horizon for investing, and let them do the rest. You even get a snazzy interface to help you know exactly how your money is allocated and how it’s doing to boot. How is that for feeling like a Pro? We personally use Betterment for our lazy (passive) investing. Here’s what the interface looks like for one of our accounts:
Not a bad return so far for very little work eh?
Conclusion: Be Satisfied With Average and Stay Lazy, My Friends
I get it. We all want the best returns possible. But there are better ways to make money than trying to beat the stock market, like starting your own side hustle or killing it at work to continually improve your income through raises. When it comes to investing, you’re probably better off riding along with the market. Use your talents to be a Pro somewhere else.