Videos: 4 Simple Rules of Investing From Marginal Revolution University

Jan 24, 2017
Investing, Behavioral Finance, Index Funds, Current Events, Video Resource

I have been meaning to check out these videos since I met a representative from Marginal Revolution University (MRU) at the RI JumpStart conference in December (yes, my to-do list is TOO LONG!). Tyler Cowen, a well-known economist out of George Mason and blogger, is the intellectual force behind this endeavor. Since I know investing tends to be the “achilles heel” for many teachers, I thought I would focus first on the MRU videos on this topic.

What do I like about these videos?

  • The simple “four rule” approach to investing and the recommendations he provides on how people should invest
  • Real-life examples to demonstrate key points
  • Charts and graphs are used effectively to provide evidence
  • Duration of videos is 4-6 minutes and just focus on 1 rule at a time
  • Five practice questions at conclusion of each video

I provided some notes on their key points and some ideas on NGPF activities that you can pair with these videos, so students can apply their learning.

  • How Expert Are Expert Stock Pickers (6:28)
    • Rule #1 for Smart Investing: Ignore the expert stock pickers
      • Burton Malkiel’s book A Random Walk Down Wall Street and the “Blindfolded dart-throwing monkey” story
      • Mutual funds: Difference between active and passive funds, most years S&P500 beats the actively managed funds, past performance doesn’t predict future performance
      • Hard to differentiate luck from skill: Coin flip example and laws of probability
      • Don’t pay big bucks for professional money managers
  • Can You Beat the Market? (6:07)
    • Rule #2: It’s hard to beat the market
      • Example of thematic investing about aging of U.S. population
      • Efficient Market Hypothesis: won’t be able to systematically outperform the market; both buyers and sellers have information for their decisions
      • What about hot stock tips? Space Shuttle Challenger example and stock price reactions; what happened six months later?
      • Random walk with a positive upward drift: what does that mean?
  • How Should You Invest? (4:45)
    • Rule #3: Diversify, diversify, diversify (and choose funds with low fees)
      • Don’t put all your eggs in one basket
      • Investing in your own employer is a terrible idea
      • How to diversify? Low-cost index funds (S&P500, for example), also consider investing internationally
      • Look for funds with low fees (e.g., Vanguard); they add up over time
      • Invest in your 401(k)
  • Who is More Rational, You Or the Market? (4:05)
    • Rule #4: Don’t try and beat the market
      • Biases: overconfident, follow the herd, not numerate
      • Markets don’t always behave efficiently; more volatile than expected
      • Momentum effect
      • Market is still really difficult to beat the market
      • Warren Buffett’s advice to his heirs


Check out these NGPF resources that you can pair with these videos:

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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