The boring index fund that beat my clever picks

In 2021 I ran a small experiment with my own money. I put half of my savings into a cheap fund that tracks the whole stock market and promised myself not to touch it. The other half I managed myself, choosing companies I believed in and reading the news every morning.

Five years later, the pot I ignored is worth noticeably more. This is not a story about a clever strategy. It is about how hard it is to beat a boring one.

What went wrong with the clever pot

• I sold two shares in a panic during a bad month, and both recovered within a year.

• I paid more in trading fees than I realised, because each trade felt small.

• I held too few companies, so one bad result hurt the whole pot.

• I spent roughly an hour a day on it, which is a cost too.

The pot I checked every day did worse than the pot I forgot about.

Why the boring pot won

An index fund owns a small slice of hundreds of companies. It never panics and it charges very little. Some companies in it will fail, but others will grow far more than anyone expected, and the fund owns those too.

What this does not mean

Index funds can still fall, sometimes sharply, and nobody should invest money they might need next year. This is one person’s experiment, not financial advice, and the next five years may look different.

But if you are choosing between spending an hour a day on your investments and spending that hour on anything else, the evidence from my two pots is fairly clear.

A few rules I would give my younger self

• Decide how much you will invest each month and automate it, so no decision is needed.

• Check the fund’s yearly fee before anything else. A difference of one percent is large over decades.

• Keep money you may need within two years in savings, not in shares.

• Stop reading market news daily. It changes your mood, not your returns.

None of this is exciting, which is the point. The experiment convinced me that most of the effort I put into picking shares was entertainment rather than strategy. I still enjoy reading about companies. I just no longer let it decide what I do with my savings.

The clever pot, by the way, is now part of the boring one.