Buffet: Buy Index Funds

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AVR
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Buffet: Buy Index Funds

Post by AVR » 15 May 2007 12:08

http://www.bloggingstocks.com/2007/05/0 ... dex-funds/

End of debate for active MF investors/stock pickers? (esp. those that revere Buffet, Lynch et al)

****
Also in the AGM, Buffet seemed to favour index funds over ETFs:

http://www.marketwatch.com/news/story/s ... 03003D4%7D

Not sure I buy his rationale here, esp. for DIYers...

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NormR
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Post by NormR » 15 May 2007 12:56

You'll also note that Buffett praised Schloss in the 2006 AR, pg 21 of the pdf.
Let me end this section by telling you about one of the good guys of Wall Street, my long-time friend Walter Schloss, who last year turned 90. From 1956 to 2002, Walter managed a remarkably successful investment partnership, from which he took not a dime unless his investors made money. My admiration for Walter, it should be noted, is not based on hindsight. A full fifty years ago, Walter was my sole recommendation to a St. Louis family who wanted an honest and able investment manager.

Walter did not go to business school, or for that matter, college. His office contained one file cabinet in 1956; the number mushroomed to four by 2002. Walter worked without a secretary, clerk or bookkeeper, his only associate being his son, Edwin, a graduate of the North Carolina School of the Arts. Walter and Edwin never came within a mile of inside information. Indeed, they used “outside” information only sparingly, generally selecting securities by certain simple statistical methods Walter learned while working for Ben Graham. When Walter and Edwin were asked in 1989 by Outstanding Investors Digest, “How would you summarize your approach?” Edwin replied, “We try to buy stocks cheap.” So much for Modern Portfolio Theory, technical analysis, macroeconomic thoughts and complex algorithms.
I note that the Schloss partnership charged 25% of profits.

graemediesel
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Re: Buffet: Buy Index Funds

Post by graemediesel » 26 May 2007 16:37

AVR wrote:http://www.bloggingstocks.com/2007/05/0 ... dex-funds/

End of debate for active MF investors/stock pickers? (esp. those that revere Buffet, Lynch et al)

****
Also in the AGM, Buffet seemed to favour index funds over ETFs:

http://www.marketwatch.com/news/story/s ... 03003D4%7D

Not sure I buy his rationale here, esp. for DIYers...
His argument about ETFs giving more temptation to trade doesn't make sense to me since you pay a commission to buy or sell an ETF but you can swich in and out of an indew fund for free as long as you don't do it too often. :?:

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Post by George$ » 27 May 2007 12:27

From the Berkshire 2004 Annual Meeting
A questioner from California asked Buffett whether he would recommend an index fund or Berkshire stock.

Buffett responded that “we never recommend Berkshire.” He also stated that “a low-cost index fund will do better than 90% of the people around you,” especially if one’s money is put to work over a period of years.

Munger added that “it’s awkward [to say that] when so many stock brokers who have done so well and honorably attend our meeting, but the majority of brokers will underperform an index fund.”

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Arby
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Re: Buffet: Buy Index Funds

Post by Arby » 26 Sep 2017 10:41

Warren Buffett is about to win ‘The Bet’
By now, you have surely heard about “The Bet,” especially if you work in money management. A decade ago, Buffett endorsed inexpensive passive-index investing over expensive and active hedge-fund management. He put up a million dollars to prove it, and challenged all comers:

Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.

...Ted Seides of Protege Partners LLC took up the wager. The bet doesn’t end for another three months, but given how far behind he is Seides has already conceded.

...Buffett is trying to teach the rest of the world of investing and money management a very simple yet elusive lesson. Costs matter. Although the dumb money seems to have figured this out, many of those working in finance either have yet to do so or don’t want to recognize it.

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Re: Buffet: Buy Index Funds

Post by longinvest » 26 Sep 2017 11:05

The stock market will return whatever it will. The reason I invest into index ETFs is not as a bet against other portfolios; it's to harvest average market returns (minus tiny fees, with possibly a small tracking error). By definition of average, there will always be better investments and worse investments, in terms of returns, over any investing period.

Buffett can win or lose his bet, I don't care. I actually dislike all the hype over his unconfirmed* win; it sends the wrong message. If people start to believe that index investing is about outperforming every other portfolio, they'll abandon indexing as soon as a crash happens and they see some other portfolios doing better (which will necessarily happen, by definition of average).

* Markets could still crash between now and December 31, 2017.
Bogleheads investment philosophy | Simple index portfolios | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VAB/ZRR

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Descartes
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Re: Buffet: Buy Index Funds

Post by Descartes » 26 Sep 2017 12:29

Maybe I'm unique in this..but, even when I don't disagree with the ideals, zealotry scares the shit out of me.
"A dividend is a dictate of management. A capital gain is a whim of the market."

OnlyMyOpinion
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Re: Buffet: Buy Index Funds

Post by OnlyMyOpinion » 26 Sep 2017 14:51

longinvest wrote:
26 Sep 2017 11:05
... Buffett can win or lose his bet, I don't care. I actually dislike all the hype over his unconfirmed win; it sends the wrong message. If people start to believe that index investing is about outperforming every other portfolio, they'll abandon indexing as soon as a crash happens and they see some other portfolios doing better (which will necessarily happen, by definition of average).
Perhaps, but it's also possible the coverage and 'hype' will cause more people to revisit their accounts, get fed up enough with the high fees and MER's they pay, and decide to migrate to low cost index etf's.
Will they outnumber the people you are concerned about? I guess that depends whether they understand the message. I think has been pretty clearly communicated in the reading I've done.

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