It's bad enough that you have to take market risk. Only a fool takes on the additional risk of doing yet more damage by failing to diversify properly with his or her nest egg. Avoid the problem-buy a well-run index fund and own the whole market.

There are two kinds of investors, be they large or small: those who don't know where the market is headed and those who don't know what they don't know. Then again, there is a third type of investor: the investment professional, who indeed knows he doesn't know, but whose livelihood depends upon appearing to know.

It's human nature to find patterns where there are none and to find skill where luck is a more likely explanation (particularly if you're the lucky manager).

A decade ago, I really did believe that the average investor could do it himself. I was wrong. I've come to the sad conclusion that only a tiny minority, at most one percent, are capable of pulling it off. Heck, if Helen Young Hayes, Robert Sanborn, Julian Robertson, and the nation's largest pension funds can't get it right, what chance does John Q. Investor have?

Mutual fund manager performance does not persist and the return of stock picking is zero.

The key aspect of an index fund is that many of them, not all of them, but many of them are extremely cheap.

If your broker or investment advisor is not familiar with the concept of standard deviation of returns, get a new one.