The best thing about average advice is that the results are pretty much guaranteed. Someone who's asking a question like this lacks the skill to differentiate between better-than-average and worse-than-average advice. So giving them average advice with nearly-guaranteed average results is doing them a great service.
Not if average results means they will lose their money, which is what usually happens to people who invest money without understanding enough to manage it themselves.
If you want advice about money listen to rich people not middle class people who read investing forums and get rattled when the stock market drops.
I think we have different ideas of what "average" advice is. People on Bogleheads don't get rattled when the market drops - they buy more aggressively.
Listening to people who got rich starting their own business, or making shrewd investments isn't useful for most people. That approach is hard to replicate and has far more risk. Someone who ground their way to financial independence with disciplined, diligent, and patient investing is a more approachable and realistic role model for a middle-class person.
Once they have a solid financial base, they can always try starting a business or making some other bet to try and launch themselves into the ranks of the truly rich.
Outsized wealth is a combination of hard work, good decisions and good fortune. But people (understandably) tend to minimize that last factor. So even if a middle-class person takes a rich mentor's advice to heart and does everything right, they may not see the same results. Whereas index-based investing is a time and numbers game; luck doesn't come into it.
Saying that index based investing doesn’t involve luck is exactly what I was getting at by the usual advice. Unfortunately, buying index funds, particularly US stock market index funds, is a matter of investing based upon selection bias. On the long timelines demanded by index investing, staking your claim on the US equities market is hugely risky, particularly when you are doing so without an investment thesis that can guide you if your assumptions change. Ask yourself if there is any condition where you would deallocate from stocks. If the answer is no, you shouldn’t be investing - you are just parking money somewhere based upon hope, not an investment thesis. It’s just high class gambling. The real adjusted return of the US equities indexes is far from certain, and trusting your financial future to them is at best a gamble, at worst a reckless decision.
Instead of buying dumb index funds, at the very least one ought to learn about the well studied areas of return drivers and diversify against those. The bogleheads who invest based upon simplistic ideas like low fees, asset (not return driver) diversification, and buy and hold in order to drive compound returns are giving advice (imo) akin to giving “common sense” advice from 50 years ago because it feels right. The reality is half or more of that common sense advice was proven idiotic 50 years later, and those who followed it without the ability to adapt to the changing world ended up paying a worse price than being wrong in the first place.
> Ask yourself if there is any condition where you would deallocate from stocks.
It's reasonable to deallocate from individual stocks, or to sell to reallocate to other investments and keep to your plan. Deallocating from the stock market entirely, long-term is a much stronger position to take. There would need seismic shifts in the global economy to do that, because it's like admitting that on aggregate companies aren't going to make money anymore, right?
> staking your claim on the US equities market is hugely risky
I don't believe I ever said you should invest solely in the US equities market. There's also REITs, ex-US developed markets, bond markets, emerging markets.
> The reality is half or more of that common sense advice was proven idiotic 50 years later
Can you share sources, please? I'd love to learn more.
Jackass Investing and Millionaire Fastlane are good layman books. Expected Returns is a more advanced but accessible one. Also the Missing Risk Premium is good food for thought since if its thesis is correct nearly everything you read about risk management in typical indexing investing literature is bogus and the opposite of true.
Tl;dr is two much more sane approaches to investing are return driver focused or income generation focused capital allocation instead of asset appreciation and compounding based upon speculative indexing. These btw are what rich people do with their money (hedge funds, managed futures, income generating investments) not park it in index funds and hope the underlyings appreciate due to asset prices going up. Rich people pay 2/20 management fees because the fees pay for true diversification. Diversification is real but requires diversifying return drivers not asset classes. (Asset price changes are just one return driver.) If you are just sitting in asset backed index funds there are a variety of tail events (non-apocalyptic ones) where their action correlation goes to one and you’re perma-in the red until you die.
