Investment advice

2007-05-30

in Daily updates

One other lesson gleaned from many conversations with economists, professors of finance, and bankers over the last two years: the degree to which managed investments like mutual funds outperform the market is generally less than the fees they charge. As such, those of you with more savings than debt should put them into a low-fee index tracking fund like those offered by Vanguard. If Donald Trump had put his inheritance into one and then waited, he would be richer than he is today.

Philip Greenspun agrees.

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{ 2 comments… read them below or add one }

. May 30, 2007 at 11:47 pm

Greenspun is quite a cynic about all this:

“What brought bonds back into fashion was the realization that corporate top management was stealing on a grand scale. If a company had a bad year, the CEO somehow had to manage on his $1.2 million cash salary. If a company had a good year, the CEO would steal any profits by exercising stock options that he and his buddies on the board had previously issued to themselves. With bonds the company borrows $1 and has to pay back that $1 plus interest. If in the meantime the managers have stolen everything that they can from the shareholders that shouldn’t affect the bondholders.”

. June 9, 2008 at 1:46 pm

Warren Buffett recently bet an ambitious hedge fund operator $1 million that they won’t beat the returns of S&P 500 after their extremely hefty fees are accounted for. Buffett claims investors will do as well with a no-load index fund over the ten years of the bet. He has long been critical of the performance claims of hedge funds, and his bet is intended to put his money where his mouth is.

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