Index Funds. The 12-Step Recovery Program for Active Investors by Mark T. Hebner

Index Funds. The 12-Step Recovery Program for Active Investors by Mark T. Hebner

The lure of fast money makes you think active, but the record proves you’re better
off passive.
– The Speculation Blues6
In the Martin Scorsese film The Wolf of Wall Street, the senior broker at
L.F. Rothschild, Mark Hanna, delivers broker training to Jordan Belfort over
a cocaine and martini lunch. “The name of the game is to move the money
from your client’s pocket into your pocket. Number one rule of Wall Street:
I don’t care if you’re Warren Buffett or if you’re Jimmy Buffett—nobody
knows if a stock is gonna go up, down, sideways, or in [expletive deleted]
circles, least of all stockbrokers. It’s all a fugazi… It’s a fake.” Hanna goes
on to highlight the lack of fiduciary duty to clients when he explains how
clients keep trading with the broker because the clients are addicted to the
process of trading. Hanna further explains that a broker needs to keep
coming up with “brilliant ideas” to keep clients’ money at the firm and
clients will keep trading “again, again, and again” because they are addicted.
Meanwhile, the client thinks he is getting rich, but that is only on paper
while the broker takes home “cold, hard cash” via commissions. “That’s
incredible, sir,” exclaims Belfort. “I can’t tell you how excited I am.” Hanna:
“You should be.”
Of course, the excitement of the broker equates to the despair of the
client. My purpose in writing this book is to show you how to avoid
becoming a victim to either an unscrupulous broker or to your own self-

destructive behavioral tendencies that draw you into speculating, more
generally known as active investing. This better way to invest is simply
passive investing with index funds.
This twelve-step recovery program for active investors will walk you
through the land mines and pitfalls of active investing and show you a better
way to invest. When you complete this twelve-step program, you will
understand the differences between speculating and investing and become
aware of the emotional triggers that impact short-term decisions. You will
also obtain an enlightening education on science-based and rules-based
investing that should forever change the way you perceive how the stock
market works. You will learn the hazards of speculation and the rewards of
a disciplined investment strategy. The best part is that you are likely to
improve your investment behavior, which should lead to higher returns and
a more enjoyable life.
Emotions often override data when it comes to investment decisions,
leading to irrational and destructive behavior. The financial news media and
Wall Street feed the fear, anxiety, and other stressful emotions experienced
by investors, resulting in less than favorable investment outcomes. This
book will teach you how to stay the course in the midst of market turmoil
so you can earn the long-term returns of capitalism that are there for the
taking.
As you climb the twelve steps illustrated in the following painting, you
will abandon the gambling behaviors of the active investors located in the
bottom right corner, ascend the stairs to claim your risk-appropriate
portfolio (symbolized by the woman handing out colorful orbs), and
continue up to the balcony where individuals who have successfully
completed their twelve-step journey enjoy the tranquility of an “investing
heaven.”

Index Funds. The 12-Step Recovery Program for Active Investors by Mark T. Hebner