I’m surprised he still picks stocks. He should just sell everything and buy SPY.
Why wouldn’t he? His career at picking stocks has been absolutely annihilating the index.
Warren Buffet just won a ten year bet that Index funds would out perform actively managed funds.
It was vs 1 high fee hedge fund, and Protege is a hedge fund that’s investment strategy was to invest in other hedge funds. In my opinion…that is literally worthless. You are investing in a fund and paying someone fees that is just picking other funds for you, and guess what…those other funds charge fees. If you were investing in Protege you were literally paying fees twice on your investments. Doesn’t even sound like a good idea to me.
Plus like I said…you have to compare similar investment strategies. Its rather pointless to say the index outperformed whatever percent of actively managed funds when a lot of those funds are niche funds that most people wouldn’t touch anyhow…like for example if you were to compare the S&P to a leveraged inverse oil ETF this year while oil has been sitting at a relatively low point for a couple years now…I don’t think many people would have bet on the inverse oil ETF to begin with…yet for someone to blindly claim “the index beat 60% of actively managed funds” or whatever they’ll end up beating this year…you are taking those types of funds into account.
What else happened over that last 10 years…
http://www.latimes.com/business/la-fi-investing-quarterly-index-funds-20170409-story.html
“The result: Conventional U.S. stock mutual funds that invest passively now hold $1.9 trillion in assets, triple what they had in 2007. Add in the $1.7 trillion in U.S. equity exchange-traded funds, another type of index portfolio, and the total in passive funds accounts for 42% of all U.S. stock fund assets — up dramatically from 24% in 2010 and just 12% in 2000.”
I think when 20% of money is invested actively…its not driving the market…its just along for the ride. What happens when 60% of assets are invested passively? I think we’ll probably hit that point in the next decade. Or in theory…what would happen if 100% of investing happened passively? Relative value between stocks would never change no matter how good or bad a company did.
I don’t ever expect a majority of actively managed funds to beat a buy and hold index fund strategy simply because so many actively managed funds are so un-diversified, niche, an charge higher fees than alternatives. I also think index funds are great for people who don’t follow the markets and don’t want to put any time, research, or thought into it, you’ll average much higher returns than a savings account, cds or bonds. However, with that being said I also don’t think a long term buy and hold strategy you implement on your own and don’t pay ridiculous fees even reflects what a lot of actively managed funds do, or takes into account the panic selling and short term market timing attempts a lot of individual investors seem to so routinely do, so I’m not entirely sold on the idea that index investing is generally always better when the conclusion came from comparing apples to oranges to bananas.
ghost 2 years, 2 months ago.
