You Can Beat Wall Street ?professionals?

by Dan Keppel Mba

Your advantage over the 'professionals' "... a virtually cost-free investment in an unmanaged S&P 500 index fund - would, over time, deliver better results than those achieved by most investment professionals..." Warren Buffett's astonishing statement comes from his recent bet. He offered $1 million to five of Wall Street's investment geniuses and he beat them with a low-cost stock market index fund. Hard to believe? Buffett says our advantage is no high fees, no commissions, no trading, and no market timing. Instead, compounding of a high-return diversified portfolio provides the stock market average returns of 11% over time. This is no fluke. The average investor gives up over 7% of their returns by using a so-called 'professional.' DALBAR found that the average investor earned only 3.79% over time. Why? It is profitable businesses that produce market returns of 11% NOT stock pickers and fast trading. Businesses are the consistent producers of value, not the smart analysts lauded for their 'flash in the pan' hits. Only Buffett has succeeded over time. He says the most important factor is compounding: "My wealth has come from a combination of living in America, some lucky genes, and compound interest." You can earn 11% not 3.79% over time.