Index funds, despite the research showing how the vast majority outperform active investors, are still not as popular as they probably should be. About half of American investments are passively invested. I would suggest the number in New Zealand is significantly lower due to our late adoption of passive investing.

Passive investing gets a bad wrap from active managers for being “average” and “boring”. As I debunked in an older article, they are much better than average. And what is wrong with boring? If it brings better results, then great.

I believe a significant part of why more people don’t invest in passive funds is because it feels like you are throwing in the towel. It is basically saying to yourself “I don’t know which asset is going to outperform, I’m going to pick them all. The winners and the losers”. That’s a very humbling thing to concede to.

Admitting that you don’t know, and that you can’t do better than the markets. It is hard to do. Hard to admit.

Overconfidence is dangerous when it comes to investing. Many people can’t distinguish between luck and skill, overestimating their skill and underestimating their luck. Good results due to skill and bad results due to bad luck.

It is hard to be humble. Not just in investing, but also in life. But conceding that you can’t beat the markets over the long term is not a bad thing. It’s an enlightening realisation that many more people could benefit from.

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The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here