Why index funds work and picking stocks does not

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Your 2-minute guide to demystifying money and making you richer

The markets, year-to-date

• S&P 500: 5,702.55 ⬆️ 20.24%

• FTSE 100: 8,229.99 ⬆️ 6.59%

• Bitcoin: $63,793.40 ⬆️ 44.31%

• GBP to USD: $1.3312 ⬆️ 4.60%

• GBP to EUR: €1.1925 ⬆️ 3.42%%

  (as of market close on Friday)

Why passive investing always beats stock-picking

At Moneyin2, we keep encouraging you to invest your savings in index funds or exchange-traded funds that passively follow a broad market of major stocks, like the S&P 500 or the Nasdaq.

(The S&P is simply a list of the 500 biggest companies whose shares are publicly traded in the US. It contains all the international household names, like Coca-Cola, Apple, and Airbnb. The Nasdaq focuses more on tech stocks.) 

• The reason we recommend this is because the broad markets always beat the day traders, the stock pickers, the actively managed funds, and the professional money managers over the long run.

But why is this so? 

Surely, an expert ought to be able to look at the market and make good gue…