Index funds: boring and tax efficient.
You know who is never boring? And who famously beats index funds by a mile?
Warren Buffett.
So have a little fun reading about the ten-year $1 million bet he made — and has just won. (Namely, that 0ver 10 years a cheap index fund — with no active management at all — would outperform any basket of five hedge funds, however brilliant their highly paid managers.)
It’s rich. As is Warren. And as are those hedge fund managers, even though they added no value. Subtracted value, actually.
(And we haven’t even talked about tax efficiency yet. In a taxable account, that gives index funds an even greater edge over hedge funds.)
That said, I’m an investor in one tiny hedge fund in which I have high confidence and that has, as some do, at least in hindsight, consistently outperformed.
And I don’t write off the possibility of finding undervalued stocks. I’ve suggested lots of losers here over the years; and others that may not ultimately be losers but surely, sorely try one’s patience. But some work out.
For example, as 2015 drew to a close, I apologized for the losers, but asked: “would this be a time to buy a little GLDD? A little PRMRF? A little BOREF? Each under $5? Check back with me in a year or two and we’ll know.”
Well, as of last night, BOREF and GLDD were essentially unchanged, but PRMRF had quadrupled. (And you would be forgiven if you now took some or all your gain on that one, at least the first 400% upside has now been realized.) I hang on to BOREF and GLDD, and to SPRT and GEC and HD and others. Hope springs eternal. (And in the case of HD, has panned out but may have further to pan.)
Editors Note: This article was originally published on September 17th, 2017 on andrewtobias.com, syndicated with permission.