Quote for the Week
In the fund industry, the average manager lasts five years, and the average investor owns four funds, so that’s four managers in the first five years, eight managers after ten years, sixteen after twenty years, and fifty-two over the entire sixty-five years. What is the possibility that fifty-two managers, coming and going, cleaning out their portfolios time after time, could with remote conceivability do as well as the index? The return you get from holding the market portfolio over sixty-five years—even a modest return—demonstrates the “miracle of compounding returns,” and the tremendous impact the cost of active management makes is “the tyranny of compounding costs.” The way mathematics works, this tyranny absolutely overwhelms the miracle of compounding returns; to wit, over an investment lifetime the active equity fund investor captures about 20 percent of the return available simply by holding an all-market index fund. — John Bogle (source)
From the Archives
Last Call
- When Wants Become Needs – Root of All
- Risk, Not Volatility, Is the Real Enemy for Investors – C. Benz
- Driving Prices – Humble Dollar
- No, Stocks are Not a Good Inflation Hedge – J. Klement
- Five Lessons from Vitaliy Katsenelson – Excess Returns
- Are You Losing A Game You Should Win? – Rock & Turner
- The Reflexivity of Credit Markets – Verdad
- Are Prediction Markets Good for Anything? – Asterisk
- Our Uncertain Uncertainties – K. Kelly
- The Petrillo Complications – S. Godin