ahead of time.3 Nobody can predict what stocks or what economic sectors will perform well in the future. Most active mutual fund managers, hedge fund managers and college endowment fund managers try. But as a result, they lose to similar, risk‐adjusted portfolios of index funds.
4 Most people buy funds with hot track records or they follow a guru with a “winning record.” Don't do that. Funds that win during one time period typically underperform the next, whether they're actively managed mutual funds, hedge funds or college endowment funds.
5 If you mention index funds to most financial advisors, most of them will try to fight you. Hold your ground. And remember that most financial advisors are not bad people. They are just undertrained and dealing with a conflict of interest.
Notes
1 1. Fred Schwed, Where Are the Customers' Yachts? Or, A Good Hard Look at Wall Street (New York: John Wiley & Sons, 1995), 1.
2 2. Global Investor Experience Study, Morningstar. Accessed August 11, 2021, https://www.morningstar.com/lp/global-fund-investor-experience
3 3. “Actively Cheated,” The Economist, July 13, 2002. Accessed May 5, 2014.www.economist.com/node/1224513
4 4. “SPIVA US Scorecard,” Accessed August 11, 2021,https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-year-end-2020.pdf
5 5. “SPIVA Canada Scorecard,” Accessed August 11, 2021, https://www.spglobal.com/spdji/en/documents/spiva/spiva-canada-scorecard-year-end-2020.pdf
6 6. Burton G. Malkiel, A Random Walk Down Wall Street: The Time‐Tested Strategy for Successful Investing, 11th ed. (New York: W.W. Norton, 2012), 399.
7 7. Warren E. Buffett, “Chairman's Letter—1996.” Accessed August 11, 2021. www.berkshirehathaway.com/letters/1996.html
8 8. “Berkshire Hathaway Inc., 2006 Annual Report.” Accessed August 11, 2021, https://www.berkshirehathaway.com/letters/2006ltr.pdf
9 9. Jason Zweig, “The Man Who Explained It All,” CNNMoney, July 6, 2007. Accessed May 5, 2014. http://money.cnn.com/2007/05/21/pf/sharpe.moneymag/index.htm?postversion=2007070616
10 10. “Spiegel Interview with Daniel Kahneman: Debunking the Myth of Intu‐ ition,” Spiegel Online. Accessed May 5, 2014. www.spiegel.de/international/zeitgeist/interview-with-daniel-kahneman-on-the-pitfalls-of-intuition-and-memory-a-834407-2.html
11 11. Peter Tanous, “An Interview with Merton Miller,” Index Fund Advisors, February 1, 1997. Accessed May 5, 2014. www.ifa.com/Articles/An_Interviewwith_Merton_Miller.aspx
12 12. Passive Investing: The Evidence the Fund Management Industry Would Prefer You Not See (documentary), Sensible Investing. Accessed May 5, 2014. www.sensibleinvesting.tv/ViewAll.aspx?id=8B9BC346-E853-475D-9050-889E41CE0289.
13 13. “Standard & Poor's Indices versus Active Funds Scorecard, Year End 2008,” April 20, 2009. Accessed May 21, 2017. http://www.spindices.com/documents/spiva/spiva-us-year-end-2008.pdf
14 14. Ibid.
15 15. Andrew Hallam, “The Embarrassing Side of Buffett's Million‐Dollar Bet,” January 11, 2018. Accessed March 26, 2019. AssetBuilder. https://assetbuilder.com/knowledge-center/articles/the-embarrassing-side-of-buffetts-million-dollar-bet
16 16. Simon Lack, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True (Hoboken, NJ: John Wiley & Sons, 2012), 175.
17 17. Andrew Hallam, “The Couch Potato Portfolio Makes Hedge Funds Look Silly,” November 19, 2020, accessed August 11, 2021.https://assetbuilder.com/knowledge-center/articles/the-couch-potato-portfolio-makes-hedge-funds-look-silly
18 18. “SPIVA Persistence Scorecard,” accessed August 11, 2021, https://www.spglobal.com/spdji/en/spiva/article/us-persistence-scorecard/
19 19. Pensions & Investments, accessed August 11, 2021, https://www.pionline.com/section/endowments?field_emphasis_image=&title=&year=2020&order=field_pub_date&sort=desc
20 20. Sandeep Dahiya and David Yermack, “Investment Returns and Distribution Policies of Non‐Profit Endowment Funds, accessed August 11, 2021, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3291117
21 21. Interview with Benjamin Felix. E‐mail interview by author, April 10, 2020.
