Ndubuisi 'Andy' Egwim explains why buying index funds is preferable to active stock picking: index funds reduce risk and costs, avoid frequent trading and broker fees, and limit psychological mistakes. He emphatically claims that about 99% of professional money managers fail to outperform index funds.
So buying an index fund means that you're reducing your risk. You're not calculating which stock market in PE ratio or eps. And you're not doing all those analysis. You're just buying basically what the market is. The big thing about buying an index is that it reduces your cost as well, because you're not buying and selling in the market, you're not paying any stock brokers, and at the same time also you're reducing the chances that you're going to make a psychological mistake. I'm going to tell you one big thing. It's like an investment secret. There are a lot of money managers and I interact with some of them. Some of them are experts. They've been doing this for years. Some of them studied math, statistics, physics, quantum, whatever, and they are applying it to the market. They're using computers and everything. 99% of professional money managers, 99% of professional money managers are not able to do better than the index funds. 99% of the professional money managers, they are not able to beat the market.
