As 2015 approaches, and you begin thinking about resolutions for the new year, make changing the way you invest your first priority.
“Active investing” means trying to outperform benchmark indexes (such as the Standard & Poor’s 500 index) through market timing and stock picking. You can capture the returns of a benchmark index (less the low cost of the index fund) simply by purchasing an index fund (which tracks that index). It makes no sense to invest in active management mutual funds, unless there is a high degree of probability that your returns will exceed those of the index. The reality is that there’s a very low probability of success.
The typical way to attempt to beat the market is to identify stocks that are mispriced, usually by relying on your own research, or the recommendation of your broker or financial pundits.
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