Friday, March 10, 2017

Indexing for the win

Credit: Warren Buffett
As someone who likes boring index funds, I rather enjoyed Warren Buffett's latest Berkshire Hathaway letter, where he details a $500,000 bet with a hedge fund manager who was allowed to choose 5 funds-of-funds and they compared their ten-year performance. At year 9, the S&P is ahead 85.4% to the nearest fund-of-funds' 62.8%.

(Buffett's letter is (assuming it's actually written by him) very readable and usually has an interesting anecdote or two.)


6 comments:

  1. I'm 100% with you on the power and success of index funds!

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  2. Ummm, thank you for not discussing the real world.....

    Why would ppl pay hedge/mutual fund PMs 7 figure salaries to run money when ppl can get a better return just on the SPY?

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    Replies
    1. 'cause people want to take a chance on beating the market?

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    2. I would say ignorance and trust. When I left a job with a 403b I had to roll it over to an IRA. I did what I thought made sense and went to the bank that I had an account at since I was 16. The rep sold me a terrible package with huge fees because I didn't know any better. I finally wised up and transferred to Vanguard, but I lost a significant chunk of cash in the process.

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  3. But those guys are so smart--they *must* be able to beat the market!!!

    OK, enough sarcasm for one day. Why would people pay? I dunno--good sales people?

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  4. Buffett's success is not as simple as picking stocks though.

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