RULE 8Peek inside a Pilferer’s Playbook

If you’ve read what I’ve written so far about indexed investing, I hope that you’re planning to open your own indexed account. Or perhaps you’ll choose an intelligent investment firm that can set it up for you.

Either way, if you currently have a financial adviser who’s buying you actively managed mutual funds, you’re probably thinking of making the split.

That’s always easier said than done. I like to think that the majority of investors who have attended my seminars have decided to index their investments—to save costs and taxes—while building larger accounts than they would have done with baskets of less-efficient products. But not all have. I know many would-be indexers spoke to their financial advisers, fully intending to break free. But the advisers’ sales pitches froze them in their tracks.

Many financial advisers have mental playbooks. They’re designed to deter would-be index investors. The advisers initiate their strategies with remarkable success. Many of their clients are forced to keep climbing mountains with 100-pound backpacks.

How Will Most Financial Advisers Fight You?

Often, when a friend or family member wants to open an investment account, he or she asks me to come along. Beforehand, I briefly talk to the new investor about the markets, how they work, and the merits of index investing. I tell the person that every single academic study done on mutual fund investing points to the same conclusion: to give yourself the ...

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