What are the downsides of long term passive investing in low cost index funds?

Good question.

When you buy an index fund you are waiving a white flag and surrendering saying that you accept being an average investor. Look around at your fellow man / woman and ask yourself if you think you are average. If the answer is yes, then you are perfect for index investing since you are satisfied with average returns.

But if you want to earn serious passive income they are not any good. They throw off a meager pittance to any investor that buys low cost index funds.

Much better to either get more education on how to buy passive income or work with someone that can help you find better deals that are not advertised on the market.

The only good thing for index investing is it does on average do better than most mutual funds which due to higher fees the majority of the time the index investing wins.

However, this is not something that someone that has access to off market deals and opportunities has to suffer with. But if the passive income is limited to those options that you can purchase in your online brokerage account then you have that restriction.

I think it might be worth looking at corporate income bonds of privately held companies and also becoming a limited partner in large multifamily (more than 100 units) communities and not limit yourself to those options your broker makes available to you online. Sure, it does take more work than clicking a mouse but if you want the extra passive income a little upfront work can lead to years of passive income at far higher returns.

I hate to see smart people like yourself getting into index investing. It is good for people that are content to be average but I don’t think that is you.

Sure, It is much easier to just click a few buttons with a mouse and buy a stock or index fund. But what if you are leaving millions of dollars on the table over decades by not investing time and money in your education. Your first step is to get a mentor that you want to learn from.

Benjamin Z Miller
www.benjaminzmiller.com