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Passive Investing Strategy (S&P 500) vs Hedge Funds
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miko33 Offline
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Passive Investing Strategy (S&P 500) vs Hedge Funds
http://www.aei.org/publication/warren-bu...ven-close/

Quote:Direct Quote from Warren Buffet
In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund.

Subsequently, I publicly offered to wager $500,000 that no investment pro could select a set of at least five hedge funds – wildly-popular and high-fee investing vehicles – that would over an extended period match the performance of an unmanaged S&P-500 index fund charging only token fees. I suggested a ten-year bet and named a low-cost Vanguard S&P fund as my contender. I then sat back and waited expectantly for a parade of fund managers – who could include their own fund as one of the five – to come forth and defend their occupation. After all, these managers urged others to bet billions on their abilities. Why should they fear putting a little of their own money on the line?

From the writer
Buffett offered to bet that over a ten-year period from January 1, 2008, to December 31, 2017, the S&P 500 index would outperform a portfolio of hedge funds when performance is measured on a basis net of fees, costs, and all expenses. Hedge fund manager Ted Seides of Protégé Partners accepted Buffett’s bet and he identified five hedge funds that the predicted would out-perform the S&P 500 index over ten years.

The result:
Quote:With 2017 over, Warren Buffett has sealed his victory over hedge funds in a bet he made a decade ago. The Berkshire Hathaway chairman in 2007 bet $1 million that the S&P 500 would outperform a selection of hedge funds over 10 years.

As of Friday, his S&P 500 index fund had compounded a 7.1% annual gain over that period. The basket of funds selected by Protégé Partners, the managers with whom he made the bet, had gained 2.1%, according to The Wall Street Journal.

I personally have almost all of my 401k and IRAs in index funds from Vanguard. I have a small cap international fund that is actively managed, but everything else is dived up among index funds.

I don't think this marks the death knell of ALL actively managed funds; however, I think this is a pretty damning death blow to hedge funds. I think this can be an interesting discussion on the merits of active investment management vs utilizing a passive investing strategy.
01-04-2018 08:12 AM
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Post: #2
RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
(01-04-2018 08:12 AM)miko33 Wrote:  http://www.aei.org/publication/warren-bu...ven-close/

Quote:Direct Quote from Warren Buffet
In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund.

Subsequently, I publicly offered to wager $500,000 that no investment pro could select a set of at least five hedge funds – wildly-popular and high-fee investing vehicles – that would over an extended period match the performance of an unmanaged S&P-500 index fund charging only token fees. I suggested a ten-year bet and named a low-cost Vanguard S&P fund as my contender. I then sat back and waited expectantly for a parade of fund managers – who could include their own fund as one of the five – to come forth and defend their occupation. After all, these managers urged others to bet billions on their abilities. Why should they fear putting a little of their own money on the line?

From the writer
Buffett offered to bet that over a ten-year period from January 1, 2008, to December 31, 2017, the S&P 500 index would outperform a portfolio of hedge funds when performance is measured on a basis net of fees, costs, and all expenses. Hedge fund manager Ted Seides of Protégé Partners accepted Buffett’s bet and he identified five hedge funds that the predicted would out-perform the S&P 500 index over ten years.

The result:
Quote:With 2017 over, Warren Buffett has sealed his victory over hedge funds in a bet he made a decade ago. The Berkshire Hathaway chairman in 2007 bet $1 million that the S&P 500 would outperform a selection of hedge funds over 10 years.

As of Friday, his S&P 500 index fund had compounded a 7.1% annual gain over that period. The basket of funds selected by Protégé Partners, the managers with whom he made the bet, had gained 2.1%, according to The Wall Street Journal.

I personally have almost all of my 401k and IRAs in index funds from Vanguard. I have a small cap international fund that is actively managed, but everything else is dived up among index funds.

I don't think this marks the death knell of ALL actively managed funds; however, I think this is a pretty damning death blow to hedge funds. I think this can be an interesting discussion on the merits of active investment management vs utilizing a passive investing strategy.

I'm in various index funds. 500, International, mid-cap. I only have a small portion in an actively managed fund.
01-04-2018 09:21 AM
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aTxTIGER Offline
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RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
Warren Buffett was a devotee of Benjamin Graham. Graham's theories(with a bit of updating) have served Buffett very well.
01-05-2018 04:26 PM
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Native Georgian Offline
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Post: #4
RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
(01-04-2018 08:12 AM)miko33 Wrote:  I don't think this marks the death knell of ALL actively managed funds; however, I think this is a pretty damning death blow to hedge funds. I think this can be an interesting discussion on the merits of active investment management vs utilizing a passive investing strategy.
true on both.

(01-05-2018 04:26 PM)aTxTIGER Wrote:  Warren Buffett was a devotee of Benjamin Graham. Graham's theories(with a bit of updating) have served Buffett very well.
I wonder if Benjamin Graham had any connection to Katharine Graham, the publisher of the Washington Post, with whom Buffett had a long extramarital affair (he was married, she had been widowed since 1963) from about 1973-80.
01-07-2018 07:26 PM
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HeartOfDixie Offline
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Post: #5
RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
I'm extremely conservative when it comes to my investments.

It may be course, but I like to say that if I can't go out and spit on it I don't want it.

I have an IRA and some other accounts I contribute to but for the most part I cash out and invest with some folks in apartment complexes etc.
01-07-2018 11:56 PM
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aTxTIGER Offline
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RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
(01-07-2018 07:26 PM)Native Georgian Wrote:  
(01-04-2018 08:12 AM)miko33 Wrote:  I don't think this marks the death knell of ALL actively managed funds; however, I think this is a pretty damning death blow to hedge funds. I think this can be an interesting discussion on the merits of active investment management vs utilizing a passive investing strategy.
true on both.

(01-05-2018 04:26 PM)aTxTIGER Wrote:  Warren Buffett was a devotee of Benjamin Graham. Graham's theories(with a bit of updating) have served Buffett very well.
I wonder if Benjamin Graham had any connection to Katharine Graham, the publisher of the Washington Post, with whom Buffett had a long extramarital affair (he was married, she had been widowed since 1963) from about 1973-80.

No relation. Graham was just a professor at Columbia.
01-08-2018 11:02 AM
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miko33 Offline
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Post: #7
RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
(01-08-2018 11:02 AM)aTxTIGER Wrote:  
(01-07-2018 07:26 PM)Native Georgian Wrote:  
(01-04-2018 08:12 AM)miko33 Wrote:  I don't think this marks the death knell of ALL actively managed funds; however, I think this is a pretty damning death blow to hedge funds. I think this can be an interesting discussion on the merits of active investment management vs utilizing a passive investing strategy.
true on both.

(01-05-2018 04:26 PM)aTxTIGER Wrote:  Warren Buffett was a devotee of Benjamin Graham. Graham's theories(with a bit of updating) have served Buffett very well.
I wonder if Benjamin Graham had any connection to Katharine Graham, the publisher of the Washington Post, with whom Buffett had a long extramarital affair (he was married, she had been widowed since 1963) from about 1973-80.

No relation. Graham was just a professor at Columbia.

The founder of Vanguard Funds - John C (Jack) Bogle - is the pioneer who created the first indexed mutual fund. I believe much of the literature on passive investing is based on his views.
01-08-2018 12:08 PM
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chess Offline
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Post: #8
RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
(01-08-2018 12:08 PM)miko33 Wrote:  
(01-08-2018 11:02 AM)aTxTIGER Wrote:  
(01-07-2018 07:26 PM)Native Georgian Wrote:  
(01-04-2018 08:12 AM)miko33 Wrote:  I don't think this marks the death knell of ALL actively managed funds; however, I think this is a pretty damning death blow to hedge funds. I think this can be an interesting discussion on the merits of active investment management vs utilizing a passive investing strategy.
true on both.

(01-05-2018 04:26 PM)aTxTIGER Wrote:  Warren Buffett was a devotee of Benjamin Graham. Graham's theories(with a bit of updating) have served Buffett very well.
I wonder if Benjamin Graham had any connection to Katharine Graham, the publisher of the Washington Post, with whom Buffett had a long extramarital affair (he was married, she had been widowed since 1963) from about 1973-80.

No relation. Graham was just a professor at Columbia.

The founder of Vanguard Funds - John C (Jack) Bogle - is the pioneer who created the first indexed mutual fund. I believe much of the literature on passive investing is based on his views.

The Unversity of Chicago Booth School of Business is named after David Booth, founder of an index mutual fund family. Economist Eugene Fama's work at Chicago, and Nobel prize winner, was also a basis for the use of indexes.
01-11-2018 02:08 PM
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Hambone10 Offline
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Post: #9
RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
TIME in the market. not TIMING the market.

I don't know who said it, but it's true.
01-11-2018 03:46 PM
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HeartOfDixie Offline
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Post: #10
RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
(01-11-2018 03:46 PM)Hambone10 Wrote:  TIME in the market. not TIMING the market.

I don't know who said it, but it's true.

That's pretty good.

I will often times "steal" some cash out of the market by throwing some money behind one or more of the car makers as they release their sales numbers. A good month will see a 2-3% temporary boost in stock price and I get in and get out.

I'm a car nut so I pay close attention to various cars and whats going on. I've only missed once in 4 years.
01-11-2018 04:10 PM
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Post: #11
RE: Passive Investing Strategy (S&P 500) vs Hedge Funds
One of several articles I've seen on colleges going to more passive investing.
https://www.nytimes.com/2017/02/09/busin...turns.html
01-11-2018 04:28 PM
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