Do you need a financial advisor?

No, not really.

Finance is a simple industry made to look and sound complicated to justify fees. Just one example, active managers love to confuse us by using Greek words. Like – alpha – to describe what other industries call “doing your job.”

Do you need financial education?

Yes, we all do.

And, mind you, this cannot be delegated or outsourced. This is a discipline where DIY pays off. 

The glorious news is, spending less than you earn, investing early and over long time horizons, Dollar-cost averaging, value investing, inside ownership, shareholder yield, compound interest … these concepts are so simple and easily explained, and capture the importance of investing without any added complication.

Ok, maybe that last one with compound interest is not entirely without complication for our linear thinking brains.

Although it can be easily explained in one sentence: “Money makes money, and that money provides more money to make more money.”

Common rules of thumb explain so much that technical details miss.

That’s why the smartest people don’t have the most sophisticated models. They have the wisest rules of thumb.


Active vs. Passive Funds

I choose to stay far away from “self-proclaimed” financial advisors who still try to peddle actively “managed” funds (their own or others).

One idea to eloquently rebut critics on ETFs from those active fund managers:

If you’re a purveyor of high-cost, high-tax, high-transaction, high-bullshit, wannabe macro-genius strategies, you might want to look into the things you have so much to say about before mocking others who are doing the best they can to save and invest rationally.

You’re either pretending not to understand this in an attempt to mislead others or you’re genuinely uninformed yourself or simply suffer from a great deal of overconfidence or delusional.”

This might shut them up.

If not, remind them that well in excess of 90% of fund managers are not actually able to beat the market index over a 10 year period (that is your minimum time horizon, right?!).

Think about it

These fund managers are considered the pros!  It is their full-time job! 

Think about what that implies …

Think about what that implies …

Think about what that implies!


Have you thought about it yet?

Ok then, there are a lot of forces and players in the Financial Industry that can separate us from our money. But our greatest financial enemy is often ourselves.  

Ok, you are willing to learn from facts and do no longer trust those overpaid active fund managers. Great.

So, you only trust yourself and thus decide to trade by yourself. Really?

Baam, your brain wasn’t made to trade!

Our brains are “hard-wired” to break the “golden rule” of trading.  Our fear-driven, excitable, emotional, biased, and flawed brains prefer (1) to avoid losses at all costs (so we would only take them when it was almost too late) and (2) to take gains quickly.

This irrational and upside-down approach to risk and reward is the mathematical road to insolvency.

In a messy world of emotions and misinformation, broad rules of thumb can be an excellent strategy. Rules of thumb aren’t perfect, of course. But that’s their advantage. By starting with a strategy you know isn’t perfect, you naturally leave yourself room for error, and are more flexible in accepting the market’s fickleness.

Still, you want to prove yourself and trade in stocks all by yourself?

Then at least develop a proper system that incorporates lessons learned from the great traders (read Jack Schwager’s books).

These principles are a good start:

1.    Psychology: emotional decision-making is a paramount discovery

2.    Discipline: you will lose big without them, rules will be your lifesavers

3.    Risk Management: the “golden rule” is to cut losses quickly and let winners run (worth repeating)

4.    Probability: repeatable methods & mechanics of risk/reward evaluation

5.    Consistency: steady compounding will be better than windfalls and wipeouts

6.    Systems: putting the first 5 together in routines of planning & preparation


and these are important drivers of financial behavior to avoid:

1. Ego and the desire to be seen as “the great trader.”

2. Irrational or immature beliefs about money, success, self-worth, and happiness such as “I deserve it!” or “This needs to happen now!” or “Once I win this back, I’ll make everything right again.” This kind of stuff tends toward either unconscious or full-blown narcissism with lots of emotional immaturity in between.

3. Ignorance or lack of skill with probabilities.

4. The illusion and overconfidence that you are in control of your cognitive biases.

Can you do it? All of the above? Consistently? Now and in the future?

Or you take the less time-consuming and more simplistic road of ETFs. They have been around for several years and have continued to gain both market share and mindshare with investors.  If you lack the time to roll up your sleeves and dig into specific stocks, ETFs, which trade like stocks but limit risk through diversification, are a viable alternative. As with many things in life, there are trade-offs. With ETFs, you trade that diversification for limited upside (don’t expect to beat the market, but you might as well expect to beat 90% of the active fund managers – not too bad a trade-off I’d say).

Ok, regular payments into a small portfolio of ETFs is dull and unimaginative, leaving no room for creativity or good judgment. But it works – partly because judgment is scarce and creativity often counterproductive on your path towards financial independence.

And don’t forget about real diversification as a hedge against your own overconfidence and our inability to predict the future.

So, to build up a comfortable nest-egg over time you don’t have to be brilliant, you just have to consistently be not stupid.

Keep it simple. Simplicity is a prerequisite of reliability.


“The big profits go to the intelligent, careful and patient investors, not to the reckless and overeager speculator.” – J. Paul Getty


  1. Hi Andy,

    Indeed looking at ETF from US to broaden my radar.but almost everything is at historical high.

    Might be better to wait …. sigh…

    • Hi Silly Investor,
      There are many ETFs listed in the US that are not containing US-listed companies. Eg. country ETFs like ARGT, RSX, INDY, or EWG that are not at historical highs. But of course, due to the sheer size of the US market, there is a certain correlation to what is happening / going to happen in the USA. Still, I believe the Emerging Markets have more room to run. Certainly, more room to grow in the mid to long-term than here at home.

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