A Wealth of Common Sense

In 1999, at the height of the dot-com bubble, the average daily trading volume on the NASDAQ was 1.1 billion shares. By 2021, that number had surged to over 5.8 billion shares per day, a more than fivefold increase. Yet, during that same period, data from DALBAR, a leading financial services market research firm, consistently shows that the average equity fund investor underperformed the S&P 500 index, often by a significant margin. This gap persists despite an explosion in financial news, trading platforms, and access to sophisticated data that was once the exclusive domain of Wall Street professionals. We have more information, more tools, and more speed than ever before, but the results for the average person haven't necessarily improved. The complexity intended to empower us has, for many, become a source of confusion and costly mistakes.

This paradox is precisely what Ben Carlson has spent his career dissecting. As a Chartered Financial Analyst and the director of institutional asset management for a private wealth management firm, Carlson witnessed firsthand how intelligent people made irrational decisions when faced with the market's overwhelming noise. He started his blog, also titled 'A Wealth of Common Sense,' as a way to filter that noise for himself and his clients. The goal was to distill the complex world of finance into a set of timeless, understandable principles. This book grew directly from that daily practice of finding clarity amidst the chaos, offering a foundational approach to investing that prioritizes behavior and simplicity over impossible predictions and needless complexity.

Module 1: Your Biggest Advantage is You

The financial world wants you to believe you're at a disadvantage. You don't have a team of analysts or a supercomputer in your basement. But Carlson argues your independence is your greatest strength. Large institutions are prisoners of their own design. They manage billions, forcing them to invest only in the largest companies. Their sheer size moves markets against them. They answer to committees and clients who demand short-term results. This pressure forces them into a destructive cycle of chasing quarterly returns. You, on the other hand, have none of these constraints.

This brings us to a critical insight. Your true benchmark is your own financial goals. Professionals are judged against market indexes and their peers every single quarter. This creates immense pressure to outperform, leading to high-risk bets and trend-chasing. But you don't have to play that game. Your only job is to ensure your money is there when you need it for a down payment, for your kids' education, or for retirement. This reframes the entire goal of investing. It’s about not beating yourself.

So what's the secret weapon this advantage gives you? Patience. A professional manager who advocates a long-term "buy and hold" strategy might get fired for underperforming in a single year. You face no such pressure. The ability to be patient and maintain a long-term perspective is your most powerful strategic edge. A Federal Reserve study showed that a simple buy-and-hold strategy outperformed the typical investor's return-chasing behavior by up to 5% per year. Why? Because the average investor panics during downturns and gets greedy during booms. Your ability to simply do nothing is a profound advantage.

And here's the thing. This leads to a simple, yet powerful, conclusion. Embrace inactivity and strategic boredom. A Fidelity study famously found that its best-performing accounts belonged to investors who had forgotten they even had them. They weren't trading. They weren't reacting to the news. They were just letting their money compound. In investing, trying harder is often the easiest way to achieve below-average results. Constant tinkering, driven by a need for control, just racks up fees and leads to poor timing. Your job is to set a sound plan and then let it work.