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Principle 8: Do Not Waste Too Much Time and Energy Trying to Beat the Market

 It is very difficult, expensive, and time-consuming to beat the market (to gain returns in excess of the returns on the major asset classes). While it may be possible to beat the market on a short-term basis, it is very difficult to consistently beat the market on a long-term basis. . You are competing against hundreds of thousands of professional money managers with much more time, money, and access to databases than you have.

If you want to try beating the market, try it for a short period of time and compare your returns after taxes to the benchmarks. However, do not waste too much time and energy trying to beat the market because you will be able to match the market return with little or no effort through no-load, low-fee index mutual funds or exchange traded funds (ETFs).

 If you feel you must trade actively, at least trade efficiently in terms of taxes. Trade in tax-deferred or tax-eliminated retirement accounts such as a 401(k), Roth IRA, or traditional IRA accounts. In these accounts, at least your taxes are deferred until you take the money out at retirement.


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