Morgan Housel Doesn’t Need to Beat the Market

Morgan Housel Doesn’t Need to Beat the Market

Best-selling author uses index funds, dollar-cost averaging in simple strategy.

Senior ETF Analyst
Reviewed by: Sean Allocca
Edited by: Ron Day

When it comes to investing, Morgan Housel likes to keep things simple. Speaking to a packed audience at the Future Proof conference in Huntington Beach, California, the author of The Psychology of Money and partner at Collaborative Fund broke down his simple investing style. 

“I dollar cost average into index funds. My net worth is a house, a checking account and index funds,” Housel said. 

It’s a tried-and-true strategy, and one that a lot of readers can get behind, but not everyone likes it.  

“There are so many people who cannot accept that [strategy],” Housel said. “They can’t understand why someone would not try to beat the market.”  

Housel explained that the reason he doesn’t try to beat the market is because he has no aspiration to do so.  

“If I can earn average returns for an above-average period of time, it’s going to achieve every financial goal that I have. It’s enough.” 

Is Day Trading Worth The Time?  

Sitting across from Housel on the stage was Nick Maggiulli, COO of Ritholtz Wealth Management. Maggiulli agreed that passive investing make sense for most investors. 

“Is that the thing you were suited to do here on earth, analyze stocks and beat the market? Or is there something else you can do that’s going to earn you far more money than you can ever make in the stock market?” he asked.  

Maggiulli gave the example of a day trader.  

“You hear about people who day trade all day. Let’s say you have a $100,000 portfolio and you spend 10 hours a week [day trading and that earns] you an extra 5% a year. In a normal year— let’s be conservative— the market gives you 5%, and you earn 10%.” 
The result is you earn $10,000 by spending around 500 hours a year day trading, or $20 an hour ($10 an hour if you only look at the returns you earn above the market).  

“That is not a great win in the grand scheme of things,” Maggiulli concluded.  

The exception is if you beat the market and have a lot of money.  
“If you have $10 million, beating the market matters. If you’re a hedge fund manager, every basis point matters, but for most people, the [benefit] is not there. There’s probably something else you can be doing that’s a far better use of your time.” 
The simple investing strategy espoused by Housel and Maggiulli isn’t unfamiliar to most ETF investors, but the amount of cash that Housel holds might be.  

High Cash Balance

The author explained that cash represented in the neighborhood of 25% of his portfolio.  

“I like to save like a pessimist and invest like an optimist,” he noted. “Save your money and have a level of cash with which you can absorb and manage and survive all of the unpredictable nonsense in the economy, but invest your money like an optimist.” 

“If you have a higher level of cash, then the odds that you will be able to hold onto your stocks through thick and thin goes up. Everyone looks at a high cash balance and just looks at the opportunity cost of that. But they’re ignoring that if having high cash increases that odds that you will hold onto your stocks forever and not get forced out during a bear market, then the actual return on that cash could be enormous.” 

“So much of investing is how can you prevent a forced sale during the bear market. That’s all of investing success. If you can do that, you’re set. A higher cash balance helps you do that.” 

Sumit Roy is the senior ETF analyst for, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for, with a particular focus on stock and bond exchange-traded funds.

He is the host of’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays,’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.