Do you know who the best investors are? Based on a study by Fidelity, it was found that the people who had the best investment returns were … dead people!
When Fidelity analyzed the investment returns on customer accounts, they found out that dead people had higher returns than other customers.
Although I have not been able to locate the source of the study, the finding does not surprise me. Dead people are the ultimate buy-and-hold investors. They do not lose money chasing new fads like SPACs, Crypto, or Meme Stocks. Nor do they actively buy and sell every day. They let the market do their work for them.
While it is no fun being a rich dead person, there was another group of people in the study that did just as well. These people were the lazy kind – they invested their money and did not do anything with it. They left it alone, so the money stayed invested for a long time and kept growing along with the market.
What makes lazy people good investors?
These people do not pretend to be smarter than everyone else. So they don’t try to pick the next winning stock. Instead, they let the market do the picking for them by investing in a market fund (like S&P 500).
The S&P 500 is made up of the largest 500 companies in America. If one of the companies does not perform well, then its share price goes down, and it gets removed from the S&P 500 list. On the other hand, if a new company does well, then its stock price goes up, and it gets added to the S&P 500 list.
The S&P index does an automatic job of picking the good companies and excluding the bad ones.
A recent example of this is Tesla. Tesla was added to the S&P in 2021 – since then, it has doubled in value. So if you owned an S&P 500 index fund, then you automatically benefited from this gain in Tesla.
You also benefited from the rise in all other wonderful companies that are in the S&P 500 – Amazon, Apple, Google, Microsoft, etc.
Investing in S&P 500 is not just a good strategy for ordinary investors – it is also the one recommended by the world’s best investor.
What if I am good at picking winning stocks?
There is a famous Mark Twain quote: Prediction is difficult… particularly when it involves the future!
The last few years should have convinced everyone that predicting the future is a fool’s errand. No one could have predicted the global pandemic, or Brexit, or war in Europe. Even more difficult than that is to determine the impact these events will have on the markets. After the pandemic, everyone predicted the market would fall, but the market ended the year more than 10% higher. And even more difficult than that is to predict what will happen to individual companies.
That is why lazy investors succeed. Instead of trying to predict the future or pick the winning companies, they let the market do the hard work for them.
In practical terms, lazy investors do not actively trade. They put a portion of their paycheck every month into a low-cost S&P 500 ETF (like VOO). That’s it!
Contrary to what you think, buying and selling stocks every day does not help you – it only helps your investment company make money. Lazy investors do not check every day what is happening to their investments. In fact, they don’t check their portfolio at all. And when they check their portfolio after several years, they find out that their small regular investments have turned into a huge sum of money!
Great investing is boring, as investor George Soros says: If investing is entertaining, if you’re having fun, you’re probably not making any money.
Its time you think about becoming a lazy investor. As a side benefit, you can tell your parents, that you were not being lazy in your childhood; you were just preparing to become a great investor!
P.S. Here is an article to help you get started on investing: Simple four-step investing for beginners.