Rule 3: Invest Wisely (The Experts)

Several years out of college, I was having dinner with a few of my old high school buddies.  One of them, Filmore, was making an observation about cultural shifts, and lamenting our relatively disadvantaged social life growing up.

"Today, it's great.  High school kids just don't seem to care about race.  They intermingle much more, now.  In fact, interracial dating is really common.  We would have done a lot more dating if it was like this when we were teenagers."

 I was floored.  I had a completely different understanding.

"Fil, the reason we didn't get dates in high school isn't because we were minorities.  The reason we didn't get dates in high school is because we were nerds!"

 It never even occurred to him.
 

Disclaimer: I have nothing against nerds.  I'm a nerd.  Some of my best friends are nerds.   Come to think of it, all of my friends are nerds.

In Filmore's defense, he's no different than the rest of us.  I once saw the results of a survey of college students.  About 80% of them thought they were smarter than the average college student.  About 80% of them rated themselves friendlier than the average.  And about 80% of them believed they were better looking than the average.

Apparently, the study was conducted at The University of Lake Wobegon. 

Self-perception is a delicate thing.  You want a healthy ego to give you the confidence you need to get through life.  But our egos also tend to cloud the reality of our own capabilities.  And that's lethal when it comes to investing.

Let's take a poll.  How many of you read "Rule 3: Invest Wisely (The Theory)?"  And when you got to the part about index funds, how many of you rolled your eyes?  Be honest.  Okay...yeah.  Just what I thought.  80%.

"C'mon, Deadwood, index funds are for chumps.  They're for people who are too stupid to excel and have always just settled for average.  That ain't me.  And I'm not one of those ULW students, either.  My IQ is verifiably way above 100.  So forget the common folk.  Tell me how the experts invest.  What do the experts say about all this?"

Oh, hey Slash, didn't see you among all the folks in the 80% out there.  Okay, fair enough.  Let's check with the experts.  Experts who are so smart on this topic that folks like you and me can't even begin to fathom how much they know.

Don't overestimate yourself.  Know your limitations and what you (and everyone else, for that matter) are really capable of achieving.

Buy index funds and fuhgeddaboudit.

Epilogue:

"Well okay, Deadwood, I admit we were a little nerdy in high school.  But at least we outgrew that."

"You bet, Filmore, that we did.  No nerds at this table.  Just a bunch of single, white collar, high tech workers hanging out on a Friday night at a sushi restaurant in Silicon Valley.  By the way, Sheldon, killer tube socks.  They really complement those cargo shorts."

"Fashion is immaterial.  My clothes keep me warm while facilitating unrestricted movement."

"I know they do, Sheldon.  I know they do."