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Step 3: Stock Pickers

almost all active managers primarily because of lower fees.”58 Rather than spending time and resources searching for the exceptional manager in the exceptional asset classes, most investors are better served by indexing in all asset classes.

Solutions

It may be easy to understand the allure of stock picking, but looking for a needle in a haystack is not the answer. This pursuit may be very lucrative and diverting for stock brokers. “After all, it’s exciting, fun to dip and dart, pick stocks and time markets; to get paid high fees for this, and to do it all with someone else’s money,” quips Rex Sinquefield59. Unfortunately, however, this well-worn pursuit has proven to be far less rewarding for their clients. Picking stocks or bonds is an ill-fated pursuit that wastes time, energy and money. The better solution is to trust the collective brain, buy the haystack, and maintain risk-appropriate exposures in low-cost globally diversified index portfolios.

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