Get Rich with Dividends: A Proven System for Earning Double-Digit Returns

Are You an Investor from Lake Wobegon?

Are you a good driver?

Are you a good parent? Son or daughter? Sibling? Spouse/Boyfriend/Girlfriend?

How do you rate in your, er, more intimate activities?

Most people think they’re in fact pretty good in all of those categories. Certainly above average. But statistics tell us that, in fact, most people cannot be above average.

And the majority of investors think they’re above average in that skill too. No matter what their brokerage statements tell them.

It reminds me of Garrison Keillor’s Prairie Home Companion, which describes the fictional town of Lake Wobegon as a place where “all the women are strong, all the men are good-looking, and all of the children are above average.”

In fact, a psychological term, the Lake Wobegon effect, is a bias in which people overestimate their abilities. Investors are notorious for this trait.

It’s unlikely that you (or anyone else) are a better-than-average investor. After all, even the pros stink out the joint most of the time.

According to Standard & Poor’s, the majority of mutual funds underperform their benchmark index in just about every category.3 More than 61% of large-cap funds failed to return as much as the S&P 500. Mid-caps were even more of a disaster with nearly 79% of funds underperforming.

Fund managers who went for growth were even worse. 88% of mid-cap growth managers, 80% of large cap, and 74% of small cap missed the index benchmark.

That means investors would have been better off investing ...