A primer for new investors
There are ten levels of investing. Past level three, the evidence thins.
Investing gets more complicated the further you go — options, spreads, portfolio overlays. What it does not get is more profitable. This page explains every level, what each costs, and what the published evidence says about it.
The evidence
Professionals with teams and terminals mostly lose to the index.
If full-time managers cannot reliably beat a cheap tracker fund, the case for a part-time investor doing it with more complicated instruments is weak. These are not opinions — they are the published scorecards.
of active US large-cap funds underperformed the S&P 500 in 2024 — slightly above the 64% average annual rate across the scorecard’s 24-year history.
SPIVA US Scorecard, year-end 2024
of the 38 fund categories S&P tracks — equity or fixed income — had a majority of managers beat their benchmark over the 15 years to December 2024.
SPIVA US Scorecard, year-end 2024
of South Africa Equity funds were merged or shut over ten years. Failed funds quietly disappear from the averages that survivors are judged by.
SPIVA South Africa Scorecard, year-end 2024
The ten levels
Every level explained, with an honest verdict on each.
The first three levels are where the evidence supports most investors. Everything above is a choice to take on more work and more cost for a return the data does not promise.
Where MCH Analysis fits
MCH Analysis supports investors at levels 06–09 — company research and options analysis for those who have chosen to work there. See the research →
Index funds and ETFs
A fund that buys an entire market — every share in the S&P 500 or the FTSE/JSE Top 40 — and charges you almost nothing to do it. No forecasting, no stock picking.
From $50 · Under 1 hr a month
Balanced and multi-asset funds
One fund holding shares, bonds, property and cash in a managed mix. Convenient — but check the fee, because actively managed versions can cost many times what an index fund charges for a similar mix.
From $100 · Under 1 hr a month
Dividend-paying blue chips
Owning a handful of large, established companies that pay and grow a dividend. Easier to hold through a crash because the income feels real. Watch for high yields signalling distress.
From $3,000 · About 1 hr a week
Core and satellite
Keep 70–90% in broad index funds, then add small tilts to a theme, sector or region. The core protects you from the satellites being wrong.
From $25,000 · 1–2 hrs a week
Factor and smart-beta investing
Tilting toward traits that have historically paid — value, quality, momentum, low volatility. Requires a decade-plus tolerance for lagging. Value spent roughly 2007 to 2020 in the wilderness: its deepest and longest drawdown on record, from December 2006 to a trough in mid-2020.
From $25,000 · 1–2 hrs a week
Picking your own shares
Reading annual reports, building a valuation, judging management. Done properly this is a second job. The honest test: can you write down why the person selling you the share is wrong?
From $50,000 · 5–10 hrs a week
Charts and tactical trading
Buying and selling on price patterns and momentum. Long-horizon systematic trend-following has real evidence behind it. Short-term chart trading mostly does not: of Brazilians who kept day trading beyond 300 trading days, 97% lost money and 0.5% out-earned a bank teller; in Taiwan, only 44% of day traders were still trading a year later.
From $25,000 · 5–15 hrs a week
Basic options
Covered calls, cash-secured puts, protective puts. Used carefully these manage risk or generate income on shares you already own. Used carelessly they concentrate risk you cannot see.
From $50,000 · 3–5 hrs a week
Option spreads
Combining two or more options so your maximum loss is known before you enter. Defined risk is not low risk — ten small positions can still compound into one large loss.
From $100,000 · 5–10 hrs a week
Portfolio options overlay
Running options as a system across the whole portfolio. The Cboe S&P 500 BuyWrite Index — a mechanical covered-call strategy — returned 8.5% a year against the S&P 500’s 9.8% from June 1986 to December 2018, with about two-thirds of the volatility. The shortfall is concentrated in the post-2009 bull market, when a covered call caps upside; from 1986 to early 2012 the two were level at 9.2% each. It is a swap of upside for smoother returns, not free money.
From $150,000 · 5–10 hrs a week
What it costs
The fee is the one return you can predict in advance.
Markets are uncertain. Fees are not. Below are the standard fee structures of US mutual funds and hedge funds — and the gap between them is wider than most people realize.
| Fund structure | Type | Annual fee | Cost over 25 yrs |
|---|---|---|---|
| Index mutual fund | Equity, tracks an index | 0.05% | ~1% |
| Index ETF | Equity, tracks an index | 0.14% | ~3% |
| Actively managed mutual fund | Equity, manager picks stocks | 0.64% | ~15% |
| Hedge fund (industry average) | Management + performance fee | 1.33% + 15.8% | ~41% |
| Hedge fund (“2 and 20”) | Management + performance fee | 2% + 20% | ~51% |
Read the right-hand column again. A “2 and 20” fee does not cost 2% — at a 7% gross return it takes about 3% a year, and compounded over a working lifetime it consumes about half of the final outcome. Of the variables on this page, fees are the one with the largest arithmetic effect.
Check yourself
Six signs you have climbed higher than you should have.
Run this every few months. Three or more, and the honest move is to step back down a level — not to try harder at the one you are on.
- You check prices more than once a day.
- You have placed more than twenty trades in the past three months.
- You cannot explain every holding you own, from memory, in a sentence.
- You are holding something because it will “come back”, not because your reason for buying it still stands.
- You have lost sleep over a position in the past month.
- Your partner does not know the full extent of what you hold.
The point
Costs compound against you. Time compounds for you. Sophistication is optional — discipline is not.
Educational content, not investment advice. MCH Advisory (Pty) Ltd is not a registered financial services provider, and nothing on this page accounts for your personal circumstances, tax position or objectives. Fund charges change — verify against the fund’s current prospectus or offering documents before acting. Speak to a registered financial and tax adviser before making any decision. See our terms of use.
Figures on this page were verified against primary sources on 30 July 2026; the fee table on 9 October 2026. Hedge-fund fee averages are re-checked quarterly.
Sources: S&P Dow Jones Indices — SPIVA US Scorecard and SPIVA South Africa Scorecard, year-end 2024 · Investment Company Institute, 2025 Investment Company Fact Book, chapter 6 · HFR, hedge-fund fee estimates, fourth quarter 2025 · Cboe Global Indices and Wilshire Analytics, options-based benchmark index studies · Chague, De-Losso & Giovannetti (2020) · Barber, Lee, Liu, Odean & Zhang (2017) · Arnott, Harvey, Kalesnik & Linnainmaa (2021) · US English.