{"id":443,"date":"2017-02-27T06:03:07","date_gmt":"2017-02-27T06:03:07","guid":{"rendered":"http:\/\/blog.kuvera.in\/?p=443"},"modified":"2019-06-10T09:39:42","modified_gmt":"2019-06-10T09:39:42","slug":"warren-buffets-10-year-old-bet","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/warren-buffets-10-year-old-bet\/","title":{"rendered":"Who’s winning Warren Buffet’s 10 year old bet on passive investing?"},"content":{"rendered":"

The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds. – Warren Buffet<\/p><\/blockquote>\n

In his annual letter to Berkshire Hath\"\"away Shareholders for the year 2016, legendary investor and founder of Berkshire Hathaway, Warren Buffet, speaks about passive investing. And his strong conviction in them as an investment option, for both large and small investors, over active funds. Very interestingly, 10 years ago he \u201c<\/em>publicly offered to wager $500,000 that no investment pro could select a set of at least five hedge funds \u2013 wildly-popular and high-fee investing vehicles \u2013 that would over an extended period match the performance of an unmanaged S&P-500 index fund charging only token fees.\u201d<\/em> Only one fund manager took up the challenge and created a basket\u00a0of 5 funds that he believed would outperform the index fund over a 10 year period (2008-2017).<\/p>\n

The active funds portfolio delivered returns of 2.2% annualized over the first 9 years. While the index fund gave\u00a0annualized returns of 7.1%. That means an amount of USD 1,000,000 invested in both would translate into USD 1.22 Million for the active funds basket and USD 1.85 Million for the index fund.<\/p>\n

There is one year left for the bet to fully play out. Will\u00a0the active portfolio catch up and beat the index fund?<\/p>\n

Do refer to the full letter for more details here.<\/a>\u00a0Do go through the entire letter but if you are in a hurry, the wager details are from page 21-25.<\/p>\n

What about you think about passive investments?<\/h4>\n

And now coming back to your own mutual fund portfolio, have you considered index funds over active funds?<\/p>\n

They are not marketed with the same zeal as active funds. But there are good options out there for you to invest at a cost of just 11bps. Yes, that\u2019s 11 paise for every Rs 100 invested. For active funds, this cost can be more than 20 times higher.<\/p>\n

At Kuvera, we recommend only<\/strong> direct plans of mutual funds and where possible, low-cost index funds.
\nSo you benefit not only from the low management expenses but also, from no commissions as there is no broker involved.<\/p>\n

If you haven\u2019t yet tried us yet, today is as good a day as any to do so.\u00a0Simply visit kuvera.in<\/a> and start your personalized plan today.<\/p>\n","protected":false},"excerpt":{"rendered":"

The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds. – Warren Buffet In his annual letter to Berkshire Hathaway Shareholders for the year 2016, legendary […]<\/p>\n

Read More…<\/a><\/p>\n","protected":false},"author":3,"featured_media":236,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[81],"tags":[83,87,84,85,86],"yoast_head":"\nWho's winning Warren Buffet's 10 year old bet on passive investing? - Kuvera<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/kuvera.in\/blog\/warren-buffets-10-year-old-bet\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Who's winning Warren Buffet's 10 year old bet on passive investing? - Kuvera\" \/>\n<meta property=\"og:description\" content=\"The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. 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