'Never invest in a business you cannot understand.' – Warren Buffett
And most important, every investor should follow the following example set by Warren Buffett:
Warren Buffett's advice for ordinary investors is to put money into a low-cost S&P 500 index fund, that passively tracks the stock market as a whole, rather that trying to beat the market.
“The investing world is a morass of wrong incentives, crazy reporting and a fair amount of delusion,” said Charlie Munger, Vice President of Berkshire Hatheway, while agreeing that the typical active fund management is detrimental to investors.
Individual stocks are expensive and in any case advisors will take a big part of the earnings. Instead, index funds are inexpensive and aren’t tied to the success of one single company in particular.
High fees and disappointing results are among the arguments of Warren Buffett against active management of funds, compared to advantages of low-cost passive management.
“In all the professions, there is value added by the professionals as compared to doing it yourself and randomly picking laymen. In investing that just isn’t true.” said Warren Buffett.
Warren Buffett consistently recommends standard investors to avoid actively managed funds.
Here’s an actively managed large cap fund vs $SPY. Has been a good buy even if it costs a few bps more
In the long-only world, active management is crap. Ask any investment management researcher tasked with manager selection. And that’s before fees are even considered.
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