For the past 10 years, most US investors have been star managers without really trying. In our country, investor portfolios are typically US large-cap dominant, so while they are up this decade (and specifically this year with the S&P), they didn’t fare well the first decade of this century.

I recommend spending a few minutes with this piece from Dimensional. They took a look back at the stock market over the past 20 years. While the 2000s and 2010s have differed starkly in performance, collectively they have reinforced investing lessons on patience and discipline – the real stars! Read their synopsis at the link below.

A Tale of Two Decades: Lessons for Long-Term Investors

As we described in this related article, we’re fans of taking a rules-based approach to investing instead of trying to actively forecast a market’s next move or a stock price’s next swing. Attempts to outsmart the market are more likely to waste your energy than deliver higher long-term returns.

So, this begs the question: Why don’t we recommend index funds exclusively for our clients?

We really like aspects of the indexing philosophy. Passively managed index funds typically employ a rules-based strategy to capture returns by tracking a popular index at a low cost. So far, so good. But, as we focus in, like we did in this piece, we start to find some inefficiencies that point to why index funds may not be the optimal vehicle for clients looking to maximize market returns. Curious to learn more? Give us a call.