investment

reddit flickr about search contact

I invest in total market index funds, international index funds, and bond index funds. The managment fee is 10 basis points.

Most money managers charge about 1 percent of funds managed, thus about ten times more than fees for index funds.

When you include fees, 80% of paid money managers are outperformed by index funds!

When confronted with the above fact, most money managers will say "that is true, but I am one of the 20% that outperforms index funds, because I do blah blah blah."

However, if any money manager could really beat index funds, you would think they would take me up on this offer:

• Instead of paying the manager only 1% of my funds they manage, I will pay them 90% of the amount they beat the index funds.

• The manager would first need to get me a secured bond for the amount of my investment, setup in such a way as to guarantee my minimum return would be the amount of the index funds.

So far I haven't found a single money manager who would take me up on the above offer.

If a money manager really could beat the index funds, don't you think they would take my offer?

If you want to learn more about index funds, check out the book Bogleheads.