IndexUniverse.com assistant editor Heather Bell recently spoke with Jonathan Clements, senior special writer for The Wall Street Journal, who writes the newspaper's widely read personal finance column, "Getting Going."

Index Universe (IU): What is your investment philosophy?

Clements: In essence, I think all investors should start by sitting down and asking themselves what mix of stocks and more-conservative investments they want to own, because that's going to be the principal driver of their portfolio's performance. And once they settle on that basic mix of stocks and more-conservative investments, they should devote all their energies to diversifying as best they can, reducing costs as much as they can and being as tax efficient as possible. If they do that, not only are they going to build a global portfolio, but also they'll inevitably end up investing in index funds.

IU: What type of investor are you writing for in your "Getting Going" column?

Clements: When I wrote my first column in October 1994, the mandate was to have a column geared toward ordinary investors, people who have $100, $500 or $1,000 to invest. That's continued to be the mandate. Over time, I think investors have become more sophisticated and the dialogue in the financial press has become more sophisticated, but the basic thrust of the column remains the same: trying to help the ordinary investor.

IU: Why are investors generally so bad at investing?

Clements: We know, thanks to neuroeconomics and behavioral finance, that investors make all kinds of mental mistakes. I think a key problem is that investors take what works in the rest of their lives and try to apply it to the financial markets. If you find a restaurant that's popular, it's likely to be good. If you find an investment that's popular, you're likely to lose money. If you work hard at your job and keep yourself busy in the office, you'll probably get promoted. If you work too hard at investing and you're too active in the financial markets, you'll probably lose your shirt. If you strive to win in the rest of your life, you'll likely get ahead. If you strive to win in the financial market, you'll probably end up losing. A lot of investing is counterintuitive.

IU: With the increased availability of information, is it easier for someone to be a successful investor now than it was two decades ago?

Clements: If you go back to the late 1980s, investors would ask questions like, "What's the best mutual fund to buy?" There was this relentless focus on buying the best stock or the best mutual fund. Today, investors are more sophisticated: They're asking questions like, "How do I build a great portfolio?" And that shift by investors is reflected in the information you see in the financial press. The financial press is much less likely to offer a string of hot stocks or hot mutual funds to buy, and they're much more likely to couch advice in terms of building portfolios.

At the same time, we've seen this evolution in the offerings from Wall Street. It's now possible for ordinary investors to build much more sophisticated portfolios than they could build 20 years ago. The problem is, not only do we have the tools to build much more sophisticated portfolios, but also we have more tools with which to shoot ourselves in the foot. For one set of investors, that new commodity ETF is a great way to diversify their portfolio. For another set of investors, that new commodity ETF is a great way to chase performance.

IU: How do you get the message across to people that indexing is the right choice?

Clements: There have always been a minority of investors who have been intensely interested in the financial markets and the related academic research, and those people have gravitated toward index funds. But that's the minority. Those are the people who buy investments, rather than having them sold to them.

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