All aboard!

Ships are very powerful machines. If operated and navigated correctly, they plow through the seas and take you to your destination in a steady, predictable manner. However, you're literally on the same boat as everyone else, with very little freedom on how to get to a destination or where to stop along the way. In addition, there's very little you can do to navigate storms. Although the sheer size and power of the ship may help weather the storm, they become a hindrance to actually being able to quickly change course to avoid them.

Mutual funds and market indexes are ships. The Wall Street marketing machine is selling you ships. Taking your $50,000 and sending to a Wall Street fund is like sending your speedboat to be hauled across Lake Erie on a large ferry.

It's ridiculous. Yes, the speedboat will slowly get there, but it's under-utilizing its ability to accomplish the same thing in a more nimble, fast way by simply navigating the waters itself. Wall Street's objective is to structure products that will maximize their returns, not necessarily yours.

The fact of the matter is that most financial institutions selling you the assurance of an expert team of money managers with fancy degrees have actually under-performed the markets. Part of this is because they can't meaningfully trade all types of securities without moving the market. However, individuals can. Huge funds need to place macro bets on stocks, commodities, bonds, etc., and are all long the market. Individuals can make micro bets on individual securities (including derivatives), and can go short.

The returns from large actively managed funds usually hardly deviate from index funds, and usually return single digits to a maximum of around 20% per year. That's actually great if the market trends upwards forever and your timeframe is say 35 years.

If it's not, consider getting off the ship, at least with a chunk of your money. Let it settle in your mind that one can actually make 5-10% in a month. However, you might be a bit more challenged trying that with $100M. But then again, you're likely not a centi-millionaire.

I'm not advocating that you don't completely get off the cruise liner known as your diversified portfolio, but it's very important to at least acknowledge the very real potential to make above market returns as an individual. Don't buy into the financial services marketing machine that tells you that the only thing you can do is sail away with them. The initial fear of doing something "different" than the rest of the crowd can be scary and painful at times, but provides a potentially consistent source of returns that are uncorrelated with the rest of the market. This is the true power of independent thinking and trading.