Random Roger (once again) makes me think

Random Roger had a great post that started with links to two extremes in investing philosophy: anyone can and should manage their own money, and essentially, almost no one can. Roger made some great points, but I'd like to go in a little different direction. The debate, of course, is between "anyone can do well as an active investor" and the "best strategy is to use stable, passive index fund strategies" or "use a professional to make your decisions". I'll suggest that the difference between the two extremes is more one of degree than kind. The Barry Ritholz article made some cogent observations about why most humans suck at investing, but guess what? You gotta make a lot of the same decisions either way. You gotta decide to put your money somewhere. Even if you use passive strategies or a manager, you gotta decide to do that. You gotta pick the strategy or the manager. You gotta decide when and how much. Most important of all, you gotta keep deciding to stay with it, or not. Not to decide is to decide.

Let me give an example. I know a few people who've swallowed the John Bogle/Vanguard Funds/dollar cost average into the indexes koolaid. I shouldn't be perjorative; there's good data that suggests that strategy has merit IF you stick with it, over 20-30-40 years. Guess what? These people pulled money out and/or stopped contributing at the same point in the past 5 years. Was it A) January 2000 or B) July 2002? Take a wild guess. Hey, if you suck, you suck.

I suppose you can argue that with a passive approach, or a manager, you have fewer decisions to make. Still, in finance, as in the rest of life, all it takes is one or two really bad decisions at the wrong time to screw you up good.

Whatever approach one picks, you have to learn not to suck.

Rule #1 Don't lose money
Rule #2 Dont forget rule #1.