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Why people avoid index funds

Granted, index funds have drawbacks. They’re usually oriented toward growth stocks, toward hot stocks. Which are, perhaps, overpriced. Although, these days, other index funds are available, index funds that are “value” oriented, such as those that target relatively cheap stocks that pay generous dividends.

Okay, to cut to the chase. The basic reason why so many people (like me) avoid index funds is that we’re constantly out to prove our worth. Maybe our parents didn’t express their love for us enough, or maybe they conveyed to us that, to keep their love, we had to excel. Whatever the reason, every day in every way, we’ve got to prove that we aren’t life’s losers. It is a constant challenge. And you don’t prove how superior you are by buying index funds.

We’re type A people. While there’s doubt these days that Type A people are really more prone to heart attacks (as was originally alleged), we do exist.

The following comes from a Website: “People with Type A personalities are often described as aggressive, ambitious, controlling, business-like, highly competitive, time-conscious, impatient, preoccupied with status, workaholic, hostile, tightly-wound…. The other end of the spectrum, or what some like to call an easy going personality, is called Type B personality.”

Society certainly needs lots and lots of Type A people -- aggressive, determined, ambitious, competitive. But, for their own financial health, we should persuade most of them to tilt their portfolios toward index funds.

Of course, another key reason why investors rarely buy index funds is that there are many people whose livelihoods depend on people buying something other than index funds.

To receive Warren Boroson’s column regularly, drop him a note at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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