The Biz Bucks Blog provides former Biz Bucks students and other busy professionals with a summary and commentary of seminal articles from the opinion pages of the Wall Street Journal. You can be notified of a new posting by subscribing to the blog (enter email in box on right) or by following on Twitter: @BizBucksGuy.
To Index or Not to Index: Not Much of a Question Anymore April 7, 2015 8:00 AM | Tagged as index funds
WSJ April 4, 2015, Page B1: “How Stock Pickers Could Beat the Indexing Goliath”, by Jason Zweig
WSJ April 2, 2015, Page A13: “Activist Shareholders, Sluggish Performance” by Jeffrey Sonnenfeld
Two articles have once again supported the investment strategy known as indexing. This strategy simply allows you to easily buy into an entire market by buying a mutual fund that is UN-managed but which replicates a market index, say the S&P 500. By having a balanced, diversified set of these index funds, investors use a buy-and-hold strategy to ride the market. Indexers have no plans to beat the market, only to match the market. How does this work out?
Zweig shows that this strategy beats most fund managers. One study shows a broad index (S&P 1500) beats 87% of fund managers last year. That was for one year only. After several years, the fund managers that beat the broad market drops. In graduate school, the Biz Bucks Guy was told less than ten fund managers have beaten the market for five consecutive years. That‘s ten out of the thousands of fund managers on Wall Street. Don’t like these odds? Try indexing. It is passive. You get to sleep at night. Over the long haul, you should do better than almost any other investment strategy.
Of course, there is no guarantee in investing. You are on your own. The Biz Bucks Guy only wants you to be aware of this approach. You will NOT hear of it from your local broker who makes NOTHING on this approach.
By the way, the only decision you make with this strategy is which company’s index funds to buy. You should compare administrative costs and pick the company with the lowest admin costs. If they don’t disclose their admin costs, move on. Check out Vanguard as one who discloses their admin costs.
[Although opinion is included, The Biz Bucks Blog is primarily written to former students of Biz Bucks training courses to encourage their daily reading of the three opinion pages of the WSJ. This refreshes principles of Biz Bucks courses and improves business acumen on topics not discussed in Biz Bucks training.]
Posted in Investing | 0 Replies
To receive email updates when a new post is made, please enter your email address in the box below and click Subscribe.
Use these key words to search past blogs:
1994 97% Alesina Recession Alinsky Allesina austerity Baloney BAT Binz bird kills Bogle Border Adjustment Tax Brulle Bryce capitalism carbon Carbon Dioxide CBO CFTC chains China Churchill Climate Climate Change Clinton Comparative Advantage Crichton Cronyism Cummins Curry Darwin Death panel demographics population economics Denier derivatives Dodd-Frank Drug dynamic Dynamic Scoring education electric car Energy Energy Policy Enron Debt Entitlements Eugenics Fat Fry Flat Earthers fracking free markets free trade Free Trade E-Verify Free Trade Zoellick Freedom Heritage Foundation Friedman gas lines Gas Prices glaciers Global Warming Global Warming Sustainability global warming subsidies IMF Globalization Trade God Google Gore Gramm Green Blob Grifo Groupthink Growth Hannity Hayek Hostess Hybrid Immigration Imports index funds Indexing Intellectual Denial investing investment IPCC JFK Joint Tax Kennedy Kerry Keynes Keynesian Keynesian Tax Cuts King Barak Bird Kills Koch Koonin Laffer Lamar Smith Lomborg macroeconomics macroeconomics;static; dynamic MACT Makiel markets Marxist medical care minimum wage Mitchell Model T Moore Morgenthau Navarro Neumark NOAA NY Times Obamacare ObamaCare Rove Health Insurance O'Reilly participation rate Patrick Moore peer review Peer Review EPA Piketty Pipelines plywood Presidential authority Price Controls Pruitt Racial divide Rare Earth Reagan Recession REE Renewable Portfolio Standards Renewables Ricardo Ridley robotics RPS Ryan Schlaff Science science integrity scoring Settled Science Shaffer shortages socialism socialized medicine Solar Panels Solvaldi Sovaldi static steel STEM Stephens Steyer stimulus subsidies subsidy sugar Supreme Creator tax policy tax reform Taylor territorial taxes corporate taxes Tesla Trade train wreck Trump unemployment wages Wind wind power women Zuckerman