No. of Recommendations: 22
Tell me what about those results makes investing in the averages seem “prudent” to you?

Investing in the averages eliminates the risk of permanent capital loss from an individual business
going kaput. Note: That's not the same as volatility, where you put aside some money to weather a
downturn until your stocks bounce back. If one or more of your companies goes kaput there is no
bounce back. It's a permanent loss of your capital. Investing in the averages avoids this risk.
In exchange, the average investor has to settle for more modest returns. Many investors are willing
to make that tradeoff because even modest results will get them safely to retirement.

You're playing a different game than the average investor. There's nothing foolish about your game,
but the comparison to the average investor is more likely to fool you than benefit you. Imagine a
casino offered you either of two games -- Blackjack or Russian Roulette. For Blackjack they offer
normal odds, but for Russian Roulette they offer to pay you $1 million for each successful pull of
the trigger. If you suddenly got unlucky at Russian Roulette, would it matter how much the Blackjack
players were making?

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.