>As most of my readers and all of my clients know, I am a big believer in utilizing index funds to build portfolio’s. I am not alone in this mindset, what follows is a small sample of quotes from other well known experts who appear to feel the same way:
“The fund industry’s dirty little secret: most actively managed funds never do as well as their benchmark.” Arthur Levitt, Chairman, SEC
“Most investors should simply invest in index funds.”Robert Rubin, Secretary of the Treasury
“Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees.” Warren Buffet
“I love index funds.” William Sharpe, Nobel Laureate
“With an index fund–the certainty of keeping up with the market is a very worthwhile trade-off for the possibility of beating it.” Jack Brennan, Vanguard CEO
“Most investors would be better off in an index fund.” Peter Lynch
“Only about one out of every four equity funds outperforms the stock market. That’s why I’m a firm believer in the power of indexing.” Charles Schwab
“Index funds are perhaps the most underrated stock funds in existence.” Mutual Funds for Dummies
“The closest thing to a sure thing is that the Wilshire 5000 index will outperform actively-managed funds by l.5 to 2 percentage points a year over a sustained period.” Jack Bogle
“Over the long-term the superiority of indexing is a mathematical certainty.” Jason Zweig, senior writer for “Money”
“The media focuses on the temporarily winning active funds that score the more spectacular bull’s eyes, not index funds that score every year and accumulate less flashy, but ultimately winning, scores.” W. Scott Simon, author Indexing is for winners only
“We find that on average, active management reduces a portfolio’s returns and increases its volatility compared with a static index.” Vanguard Investment Counseling & Research Analysis
“They’re just not going to do it (beat the market). It’s just not going to happen.” Daniel Kahneman, Nobel Laureate
“I was not always an obnoxious indexing zealot. Ten years of believing in and selling active management strategies in the brokerage industry made me this way.” Rick Ferri,CFA, author, financial adviser
“Active portfolio management thus tends to generate lower returns and higher taxes.” John Haslem, author, “Mutual Funds: Risk and Performance Analysis”
“Indexing virtually guarantees you superior performance.” Bill Bernstein, author, financial adviser
“Index funds save on management and marketing expenses, reduce transaction costs, defer capital gain, and control risk–and in the process beat the vast majority of actively managed mutual funds.” Good & Hermansen, authors
“In every asset class where they are available. Index! Four of five funds will fail to meet or beat an appropriate index.” Frank Armstrong, author, financial adviser
“Searching through a list of 234 domestic equity funds that have survived for 20 years, only 31 did better than the Vanguard 500 Index. That means the odds are really, really poor that any of us will do better than a low-cost broad index fund.” Scott Burns, syndicated columnist
“Choosing actively managed funds is the triumph of hope over reason and experience.” Larry Swedroe. author, financial adviser.
“It’s just not true that you can’t beat the market. Every year about one-third do it. Of course, each year it is a different group.” Robert Stovall, investment manager
“Giving up the futile pursuit of beating the market is the surest way to increase your investment efficiency and enhance your financial peace of mind.” Ron Ross, author and adviser.
“It is basically impossible to beat the market.” Prof. Eugene Fama
“Indexing is a marvelous technique, I wasn’t a true believer, I was just an ignoramus. Now I am a convert. Indexing is an extraordinarily sophisticated thing to do.” Douglas Dial, former CREF portfolio manager.
“Simple buy-and-hold index investing is one of the best, most efficient ways to grow your money.” Michael Lebouf, Ph.D., author
“The best plan for most of us, is to commit to buying some index funds and do nothing else.” Charles Ellis, author
“With the market beating 91% of surviving managers since the beginning of 1982, it looks pretty efficient to me.” Bill Miller, portfolio manager
“We should just forget about choosing fund managers and settle for index funds to mimic the market.” Pat Regnier, former Morningstar analyst.
“The most efficient way to diversify a stock portfolio is with a low fee index fund.” Paul Samuelson, Nobel Laurete
“We find that on average, active management reduces a portfolio’s returns and increases its volatility compared with a static index implementation of the portfolio’s asset allocation policy.” Vanguard study
“Buy and hold. Diversify. Put your money in Index Funds.” Justin Fox, Fortune senior writer
“I am somewhat skeptical about anyone’s ability to consistently beat the market.” Moshe Milevsky, author
“With a very simple and basic understanding of index funds, you can consistently beat 70% to 80% of all professionally managed index funds.” Tweddell & Pierce, authors.
“Invest in a stock index mutual fund. What a brilliant, ingenious, common sense idea that I can’t take credit for, but can religiously pass along to those of you who want to unclutter your financial lives and own a sophisticated portfolio.” Bill Schultheis, author
“For most of us, trying to beat the market leads to disastrous results.” Prof. Jeremy Siegel, author
“The surest way to make money in the stock market is not to work very hard at it. Don’t try to outsmart the market; settle for matching it. Put most of your money in an index mutual fund.” Gary Belsky, author
“My strongest commitment in the mutual fund arena is to index funds.” Richard Young, editor
“I recommend that the long-term buy-and-hold portion of your equity portfolio be invested in equity mutual funds.” Sheldon Jacobs, author
“The smartest thing people can do if they want money in the equities market is buy an index fund that is run for 30 basis points a year and forget about it.” Elliot Spitzer, NY Governor
I’ll add my own quote now:
“Indexing doesn’t guarantee you better results, but it has the best probability of giving you the most return your money can buy. Choosing to utilize active managers is no different than choosing to sit down at the craps table in Vegas, you might walk away a winner, but odds are you’ll lose”
If you’ve got some extra time on your hands (or are an insomniac and need something to put you to sleep) you can click here to read Standard and Poors latest Mutual Fund Scorecard report that shows what percentage of funds actually beat their benchmark.
Have a great weekend,
Scott Dauenhauer, CFP, MSFP, AIF