Is value investing, in your opinion, the only proven investing methodology?
Anonymous Staff asked
I’ve come to the conclusion that value investing is the only proven investing methodology, and I’m trying to understand why options and all these other sorts of securities exist, and why these other types of trading practices are so popular. Is it simply that people generally don’t know the right questions to ask when getting into investing?
Grant Staff answered
Good questions Rob.
Value investing is the best match for me because I’ve seen proven evidence that it works and it makes sense to me.
There is no question that money can be made with other investing methods as well. There is no perfect method. However, I feel that some methods are riskier and less consistent than value investing.
I can’t really tell you why people choose to invest with other methods.
From experience, I’ve noticed that people don’t always choose the most effective or simple ways to do things.
For example, it has basically been proven again and again that mutual funds and actively managed funds consistently perform poorly against standard low-fee index funds.
Not only do the low-fee index funds perform better, but they also cost next to nothing to invest in and they are totally passive. You just invest and leave your money in there.
So why do people continue to waste money on expensive fees of mutual funds and active managers while receiving worse results?
I think one reason is that financial advising companies spend huge amounts of money on advertising to persuade people into thinking that their mutual funds are a good option. However, factually speaking, people have historically done far better by just investing in a low-fee index fund.
The best you can do is just look at investing as objectively as possible and see what really works and makes sense to you.
Hope that info is helpful.
-Grant