Warren Buffet Says 99% Of People Should Invest In Index Funds
Saturday, September 5, 2009 at 9:48AM (Talks about index funds around the 1:20 mark)
This is good advice. Pick up any personal finance book and they'll all tell you the same thing and quote any number of studies that basically say: 75-80% of actively managed funds will underperform the market over a longer period of time - in large part due to their fees. With a 30+ year investing horizon, even a 1% difference in performance can translate into huge differences in the final value of your savings.
So if you're just getting started in thinking about your long term savings - you should consider low-fee index funds as part of your strategy or if you're currently ploughing money into high-fee mutual funds, you might consider redirecting it and lowering your long term expenses.
I'll write a longer post about this in the future.
Disclaimer: I'm not qualified to give anyone investment advice. This is just my personal opinion and outlook. You should always do your own research.
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Reader Comments (2)
For a long time it was impossible to invest in low cost index funds in Hong Kong - no one offered them and overseas funds managers refused to sell to Hong Kong investors.
Now there is a modest range of listed ETFs available. Although many are not as low cost as the likes of Vanguard, they are a major improvement on the actively managed funds.
I'll be interested to see what you come up with on this topic.
Yes - the lack of access to true index funds makes life a bit harder. I've started researching the ETFs (Wikipedia link) trying to dig into their exact fee structures.
Logic would dictate that they should perform less well than index funds over a long period of time due to transaction fees because they can be traded throughout the day.
That said - I do agree that they are better than nothing - or handing fees over to fund managers.