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Author: LGM2007 One star, 50 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75683  
Subject: Re: Index fund investing versus stock selection Date: 10/8/2007 12:45 PM
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Here's another view along with one man's experiences - you may identify with some of these ideas and want to give it a try - if not, there's nothing wrong with index funds either:

- Part (and I do mean part) of why professional money managers (and here, I mean mutual fund managers) don't beat their benchmarks is due to the limitations they have placed on them - such as specific industries they can/can't invest in, specific market caps they can't touch, etc. An individual investor doesn't have these issues - you can buy anything, of any size, use options, vary your mixes, etc. That's one reason why hedge funds have become so popular. But that's an entirely different issue and I'm not recommending that route.

- I use 3 TMF advisory services. Yeah, I know they had newsletters that may have failed in the past and are no longer around. But an inventor may also fail several times before getting it right. I can't vouch for their future viability, but I've made enough outsized returns (as defined by comparison to appropriate benchmarks) in the past 3 years that I could endure a bad year or so (when I would switch courses) and still be ahead of the game. And though some of TMF's advertisements look like they were written by used car salesmen (oversensationalized), it doesn't change their results.

- The Hulbert Financial Digest is an independant (as far as I know) source that provides the performance of newsletters. There are many that have been beating index returns for 10 and 20 years. There are many many more that haven't, but if you use letters that have been successful and cherry pick their suggestions (based on which ones they are highest on), it can be done.

- You should only buy individual stocks if you will commit to following them and being critical of what you read. And it helps if you enjoy it as well - i.e. don't consider investing a chore, but almost a hobby as well as a necessity (to fund your retirement).
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