"Those who have knowledge, don't predict. Those who predict, don't have knowledge." ~ Lau Tzu
The title to this post was written with tongue only partially in cheek: The passive investor, in the spirit of Lau Tzu and the Taoist philosophy, proved once again in 2011 that going with the flow of nature most often provides the greatest results.
"Nature never hurries, yet all is accomplished." ~ Lau Tzu
Lau Tzu's Taoism is largely based upon the wisdom of applying the rythms and balance of nature to one's behavior and to one's life in general. Humans are a part of nature and, as I often like to point out here, human nature extends to financial markets.
As I addressed in my Angles post, going against the crowd has its merits at times both in life and in investing, but unless the investor receives intrinsic value from the act of investing, the go-with-the-flow nature of passive (index) investing is the best approach.
This passive indexing style vastly outperformed actively-managed funds in 2011. For example, the S&P 500, including dividends, was up 2.11% in 2011 while the average large blend category fund gained just 0.02%. In different words, it paid to just go with the flow of the broad market last year rather than buy an actively-managed fund.
Index funds don't beat fund managers every year but there is certainly enough historical data to show that most fund managers do not outperform the broad market indexes on a consistent or long-term basis. As I enter my sixth year as the owner of an independent investment management firm, I've become increasingly humble as I continue to align my investment philosophies with balance and passivity (the attempt to beat the market often ends in the opposite result).
"Health is the greatest possession. Contentment is the greatest treasure. Confidence is the greatest friend. Non-being is the greatest joy." ~ Lau Tzu
Unless investing provides a significant level of non-financial reward for you, there is no good reason to ever attempt to "beat the market." In 2012, enjoy the richness of life by applying the natural virtues of patience, moderation, contentment and simplicity.