Quoted from Methos:
Vanguard has a great history and I subscribe to the Boglehead theory myself. I keep 95% of my value with index funds of different sorts. You're right, there is $ to be made, but there is also money to be lost.
I am preaching to the choir here but...
Rule of 72 states that your money will double in value in roughly 72 divided by the interest rate years. At a 7% return, this would imply money doubling every 10 years and at 10% this would imply money doubling every 7 years.
Past performance is no guarantee of future success but you can look at the historical performance of any mutual fund out there over a 1,5,10 year period... whatever.
In theory, all you would have to do is selevt mutual funds that hit 10% average interest over the past 10 years and you would double your money every 7 years in accordance with Buffets ideals. Easy right?
The problem is, the higher the return (on average) the higher the risk and the bigger the swings.
I personally believe index funds and mutual funds are a safer play that individual stocks as there is instant diversification (of a sort) in every fund.
I believe that a mix of mutual funds/index funds and individual stocks is the way to go. I love picking stocks (it's fun) and have had much bigger swings in my stock market account than in my mutual funds. Looking back, my mutual funds have doubled in value at between 5 and 7 years (markets been nuts) in my adult lifetime. I am doing much better in my mutual funds than in my individual stocks over time. As such, I personally keep my 401k money in mutual funds, while keeping my IRA money in stocks. This forces about an 80% mutual fund 20% stock fund split at any given time. If I lose my butt on stocks it sucks, but it's not going to keep me working forever.
However, I think we can all agree that 1 investment appreciates more than any other in this day and age, and that is a solid portfolio of 5+ year old pinball machines that we can play and then sell at cost at worst. I recommend diversification between as many manufacturers as possible (not you Hopepin).
Pinball... that's why we're here... pinball.