A lot gets written about using passive investing in Index Funds vs. Actively Managed Funds. The biggest problem with a passive strategy is human nature. Most people who DIY will freak out when the market drops and sell at the wrong time. Having a good investment professional in your corner will talk you down off that ledge. Even if your “index fund” outperformed most actively managed funds, YOU the individual didn’t because you tried to time the market either through fear or arrogance. How do I know this? A bunch of our FPU students have told me so.
In one class, when we were discussing mutual funds and market performance one lady told me (in 2014) that her 401(k) had just come back to the value it had been at pre-2008 recession. That made NO sense, because the entire market had recovered in 2009. The problem?
She freaked out and sold at the bottom – and missed the entire recovery. It took her years to regain the balance she had in 2008. But she blamed “the market”, and not her bad decisions. So while it is mathematically possible to invest passively and do well, this is a behavior problem as much as it is a math problem. And most people won’t be successful with it long term.