Great counter-point. Just to be clear, I'm not knocking that index funds are a good investment option - I'm knocking the often repeated mantra that if you are going to be lazy, invest in index funds.
The the truth is, you can't be lazy - it's simply not an option. It's the burden of having savings. You need to research your investment decisions and understand your financial goals even if you decide you want a passive investment strategy. Why? Here are a few scenarios where investing the majority of your savings in index funds probably won't make sense:
i) You are approaching retirement age and will be living off your savings in the next few years. You have saved just enough to live out your expected lifetime.
ii) You are a young hacker and will be bootstrapping with your friends in a few years (sounds familiar?). You are close to saving enough to pay for your personal burn & even server costs for a year.
i) & ii) are clear cases where the users need liquidity and are unable to handle index fund volatility.
No one lazy would realize this. The truth is those who decide they don't want to actively manage a portfolio still need to understand a lot of things (savings accounts, CDs, annuities, bonds, treasuries, etc.) before they decide to jump into index funds.
Essentially, I think investing is a part time job regardless of your strategy. It's the burden of having savings.
Absolutely. Index funds reduce the burden, but don't absolve you of making decisions. Asset allocation, as you say, is still hugely important. So is geographical diversification.
The the truth is, you can't be lazy - it's simply not an option. It's the burden of having savings. You need to research your investment decisions and understand your financial goals even if you decide you want a passive investment strategy. Why? Here are a few scenarios where investing the majority of your savings in index funds probably won't make sense:
i) You are approaching retirement age and will be living off your savings in the next few years. You have saved just enough to live out your expected lifetime. ii) You are a young hacker and will be bootstrapping with your friends in a few years (sounds familiar?). You are close to saving enough to pay for your personal burn & even server costs for a year.
i) & ii) are clear cases where the users need liquidity and are unable to handle index fund volatility.
No one lazy would realize this. The truth is those who decide they don't want to actively manage a portfolio still need to understand a lot of things (savings accounts, CDs, annuities, bonds, treasuries, etc.) before they decide to jump into index funds.
Essentially, I think investing is a part time job regardless of your strategy. It's the burden of having savings.