Dollar cost average purchases of index funds, and slowly draw down your shares in retirement. Maybe rebalance every year or so as you get older. In other words, don't panic or try to time the market. Those are purely speculative and usually pro-cyclic movements that just introduce noise into price discovery. After all, when there's a market crash, did millions of machines in factories fall apart, or millions of workers in offices forget how to do their jobs? It's just a psychological overreaction.

As to institutionalizing this stability, it would be nice if index funds offered fund choices that prohibited selling or trading for one, two, three decades. Since you as the investor would be adding information to the market ("I'm not an index fund band-wagoner, I understand buy-and-hold and I will practice what I preach") you would be rewarded with better returns in exchange for signaling your intentions and acting as a cushion when everyone else is panicking.

> After all, when there's a market crash, did millions of machines in factories fall apart...

In 2008, the crash happened because suddenly Wyle E. Coyote realized there was gravity when he ran off the cliff. Mortgages were actually defaulting on a very high rate, but people put blindfolds on and didn't want to see. It wasn't just a "psychological overreaction" but real fear and panic as those same investors were trying to squeeze through the same exit door as everyone else.

There is still some reasonable fear in 2019 that large financial institutions will choose to make money at the expense of the economy.

If you were invested in the broader market, and didn't move your whole portfolio in our out of cash in 1 year,the 2008 worldwide economic collapse was barely a blip in long term performance.

So you're point is exactly what again? It's okay for banks to manipulate the markets because in the end it all averages out?

> It wasn't just a "psychological overreaction" but real fear and panic as those same investors were trying to squeeze through the same exit door as everyone else.

Panic is quite literally a psychological overreaction.

So if only people had acted rationally while they were losing billions of money, things would have been okay?

I think the only thing one should always do is actively update one knowledge and be ready to adjust strategy accordingly.

No strategy/advice last forever

There is no such thing as passive investing per se.

So instead of recommending fund, it's better to recommend them to learn of the fundamentals of investing instead.

And isn't the fundamental truth of investing: optimize returns based on your tolerance for risk? For the vast majority of the population, the optimal way to get the highest returns with the lowest risk is to put the money into either the S&P 500 or a total market index.

Every study has shown that people do not get rewarded appropriately for the risk they take on when they move away from diversification.

The fundamental as in you should know how anything generate value, what is index actually is, how the index work, why the index being recommended, how the stock market work, etc.

Maybe we are wrong about the fact that active fund managers do a poor job? In the same way that mathematical models failed to account for the <1% unlikely event in the 2007 crisis, and predicted everything was just fine, maybe our mental models are not crediting the fund managers with saving our investment from this particular failure mode of passive index funds.

Unfortunately it's not clear how to tell which fund managers would actually be able to succeed at this.

Maybe one answer is a new fund type that spawns smaller funds automatically at a certain amount of capital raised which invest variable amounts in a broader group of companies.

Can I sell you a mattress?