The market is made up of only two types of investors: passive and active. Passive ones believe in the `efficient markets hypothesis’; so everything currently knowable about a company is already incorporated into the stock price. Believers in active management say that the market is inefficient. But passive investors continue to outperform active investors.
To have a good investment experience all you need are three things: First, a belief in the capitalist system – that providers of capital must be rewarded with expected returns commensurate with the perceived risks. Second, have the foresight and knowledge to build a diversified portfolio. Third, have the discipline to stay the course by regularly rebalancing your portfolio.
Unless it is for entertainment value, turn off CNBC (or at least hit the mute button), cancel your subscriptions to financial trade publications, and don’t visit Internet chat boards that tout great funds, great stocks, or new and interesting investment strategies. Instead of reading Money magazine, you can read a good book. The market has already done work for you. It is highly unlikely that your efforts will add value.
When the world looks darkest and prices are most distressed is just when future returns have been the greatest for those with the discipline to avoid the noise of the market and stay the course. When the world looks brightest (and it appears to be the safest time to invest) and investors are typically chasing great returns is when future returns have turned out to be the poorest.
It seems that weather forecasters have wrongly borne the brunt of criticism on their inability to make accurate forecasts. William Sherden studied the predictive ability of investment experts and also of six other forecasting professions — meteorology, technology assessment, demography, futurology, organisational planning, and economics. He concluded that while none of the experts were very expert, the folks we often make jokes about — weathermen — actually had the best predictive powers.
Our education system has failed investors, so most are ignorant of the lessons that history provides. This leaves them far too susceptible to the emotions of greed and envy. Investors would also be well served if they simply remember that the four most dangerous words in the English language are THIS TIME IT’S DIFFERENT 
