“A minuscule 4 percent of funds produce market-beating after-tax results with a scant 0.6 percent (annual) margin of gain. The 96 percent of funds that fail to meet or beat the Vanguard 500 Index Fund lose by a wealth-destroying margin of 4.8 percent per annum.”
When asked if private investors can draw any lessons from what Harvard does, Mr. Meyer responded,
“Yes. First, get diversified. Come up with a portfolio that covers a lot of asset classes.
Second, you want to keep your fees low. That means avoiding the most hyped but expensive funds, in favor of low-cost index funds.
And finally, invest for the long term.. [Investors] should simply have index funds to keep their fees low and their taxes down. No doubt about it.”
These are the wise words of David F. Swensen, respected Chief Investment Officer of the Yale University Endowment Fund since 1985!
Adding a fourth law to Sir Isaac Newton’s three laws of motion, the inimitable Warren Buffett puts the moral of the story this way: For investors as a whole, returns decrease as motion increases.
(One) specific lesson…is the merits of indexed investing…you will almost never find a fund manager who can repeatedly beat the market. It is better to invest in an indexed fund that promises a market return but with significantly lower fees.