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Know a little, invest better
The background myth
Many people believe they need a lot of background before they can start investing. They research specific industries, such as the energy sector, so they can build an energy portfolio.
Sensible investing
Sensible investing for most people means low-cost index funds that capture market returns. Those returns have been there and should continue to be there in the long run, and capturing them does not take much background knowledge.
Selling versus engineering
Much of financial services is not approached like engineering. It is approached like a car dealership, selling product, and the advice behind it is not always in the customer's best interest. Reading academic literature gives confidence that advice is high quality, the kind that came from careful study rather than a sales target.
Why is financial advice sold like cars?
In 2015, the White House Council of Economic Advisers estimated that conflicted retirement advice, in which advisers are paid in ways that favor some products over others, costs US savers about $17 billion a year. The estimate informed the Labor Department's fiduciary rule proposal. A fiduciary is bound to put a client's interest ahead of their own.
How did index funds reach ordinary investors?
John Bogle launched the first index fund available to ordinary investors at Vanguard in 1976. It was widely mocked as Bogle's Folly, and it raised only about $11 million at launch against a target of $150 million. The fund tracked the S&P 500 and later became the Vanguard 500 Index Fund, one of the largest mutual funds in the world.