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He is the author of the writer A random walking wall street
The results are in: This time is not different. Indexing remains an optimal investment strategy.
Every year S & P Global Ratings broadcasts reports by comparing all active managed investment funds with various stock indices. These reports are considered a gold standard for assessing the index fund alternatives of active stock management.
Bottom line at the end of 2024 report This is the lack of surprises during this month. In 2024, US passive index funds prefered two-thirds of active managed funds. This is a third of the three-thirds of managers that have been in the past, it is in the past that shows that there is not the same with each other.
When you combine the results in 20 years, about 90 percent of active funds are down to lower valuable index funds and index stock market trading funds. The equivalent long-term results were recorded for developed economies, developing markets and bonds. 2024 For a small lid funds that are good, only 11 percent have been in the last two decades.
It is not possible to beat the market, but if you try, you can achieve more than 90 percent of active managers. Evidence is getting stronger every year: the Index Fund is an optimal strategy for an ordinary investor.
Despite the evidence, many active managers claim that the future will be different. The popularity of a common landscape, passive investment popularity has created an unhealthy concentration in popular indices and has become an increasingly risky strategy. An argument, which is the champion by some active managers, is the casting of index investors to market money without gaining and growth capabilities. This is compromising to reflect the fundamental information on the market, creating incorrect welfare, and thus allow active managers to use their skills in the future.
Undoubtedly, it is correct that the market is a high concentration. There are a third weight in the S & P 500 index of several technology (known as the magnificent 7) and in 2024 was responsible for more than half of the total income of the market in 2024. However, this concentration is not unusual.
In the early 1800s, bank shares were represented by a quarter of the total exchange value. Railway reserves are most part of the total market value in the early 1900s and the Internet shares are dominated in the index in the late 1900s. And it is far from unusual for a cheap percentage of most of the market for most of the market. A study by Hendrick Bessembinder calculated all 4 percent of only 4 percent of US shares only over the treasury documents since 1926. The concentrated market is not a reason to give up index funds. All shares in the market will ensure several stops responsible for most of the market.
The second “This time is different” the argument, index funds grew so fast that the index funds grew so fast, which allows the market prices to accurately reflect the correct and new information. Some have made the increase in the shares of the passive index, created bubbles in the exchange market as the existing boom in the AI. More investment managers will allow the future index to be easier to beat the future without taking into account fundamental data.
There are logical and empirical reasons to reject these allegations. Although 99% of investors receive index funds, the remaining 1 percent would be much to ensure that new data is reflected in the stock market prices.
If the bubbles believe that the active managers will allow managers to leave the room, review information for expanding Internet shares until 2000. Shares related to many Internet-selling on third-digit earnings are higher than current assessments of today’s favorite AI shares. Spiva information shows that 2001, 2002 and 2003, 65, 65, 65 and 75% of active managers this “post–bollay” went on to the market.
Proven is more attractive over time. The basis of each investment portfolio must be indexed and diversified between active classes. Indexing will result in low fees and low operating costs and this tax is efficient. The index funds are also bored, and these are less sensitive to the waves of optimism or pessimism that characterize financial news. Like the white rabbit in the movie Alice in Wonderland To us, “Don’t just do anything, stand there.”
