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Submerged Piggy Bank

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How to Avoid Being Sunk by the Market

Evan Cooper Oct 11, 2016

Investors in their prime earning and saving years – from about age 45 to 60 – have a view of investing that was shaped by what they saw, heard and read many years before.

That environmental effect is much like the way the “Greatest Generation” (those who fought in World War II) were shaped by the experiences of the Depression, even though they were children at the time, and how being thrifty became part of their behavior as adults.

A Different Stock Market

Today’s prime investing age cohort grew up at a time when institutional investors were growing in importance, but individuals were still a powerful force in the stock market, and when trading volume and portfolio turnover were much more sedate than they are now.

These and other signs of how much the market has changed over the years come from a new book by veteran investor Charles Ellis, “The Index Revolution: Why Investors Should Join It Now.” The main point of Ellis’ book is that the market environment and structure have changed so much over the years that active management – the fancy term for stock picking – no longer works and that the best route for most investors is passive investing through index funds.

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