When I managed a hedge fund, I cared about one thing: Performance. I had an arsenal of tools that I could use to maximize performance, and I spent all of my time doing nothing but thinking about markets. Individual investors are at a disadvantage when they're up against professional investors, which is why I would recommend that they use index products like index mutual funds and ETFs. They get low costs, transparency, great liquidity, and wonderful tax treatment; and they can do as well as the market, after fees.
There are also ETFs that use strategies to maximize market returns by doing something as simple as weighting an index based on fundamentals like earnings and dividends, rather than market cap. This means that the index will be less likely to buy when stocks are cheap and sell when they are dear. It's instant value investing, which is a great idea when stock markets are falling.
Last updated February 06 2008: 10:16 AM ET
