Index Funds vs Active Investing for Beginners

Added: 2026-05-26

[00:00:00]If someone with an average income, 100 to 150,000, was just beginning their investment journey, would the simple plan of investing in index funds or ETFs be wise, or would it be better to seek value? I just made a video about this. I think it went up yesterday, but while you when you're starting off, I don't think it makes any sense to do any sort of active investing whatsoever. The return on your time and effort is going to be like nothing, because let's say you you've just started investing, and so you're making, you know, you're you've got, you know, a thousand dollars invested, or you've got ten thousand dollars invested. If you can increase your because you you spend the time, you do the work, and you just crush it, and instead of averaging 10% like the stock market does, you get 20%. So, you double the market, and you crushed it. Well, on $10,000, you just made an extra thousand bucks. So, it's literally meaningless over the course of your your investing career. It is much more important, in my opinion, to focus on increasing your income and getting your portfolio to a place where you've got like at least a hundred grand to start investing with.

[00:01:02]Until that point, throw everything in index funds, cuz you're it's super easy to match the market. You just invest in the market. And so, then you don't have to worry about anything. You just socking money away. Once you have enough money invested, like, let's say a hundred K, then it starts to make sense to spend some time and effort on increasing your portfolio returns.

[00:01:21]Because then, the same amount of effort and time you would have spent before, you're spending now, but you're making an extra ten grand instead of one grand.

[00:01:29]Over time, that turns into making an extra hundred grand instead of an extra ten grand. And then over time, that turns into making an extra million dollars. So, the more money you make, and the more money you have, the more it makes sense to focus on increasing your returns. But, in the beginning, it's just it's just you'd be better off spending that time working at McDonald's. You're going to make more than, you know, and also, that doesn't even take into account the risk that you do it wrong in the beginning, because it's hard to learn that stuff, and you're going to make mistakes, and you're actually probably going to lose money in the first couple of years trying to beat the market. And so and so I always I think it doesn't make much sense to actively invest until you have a chunk of money that is worth actively investing on.