In A Shift From Active To Passive, An Index Fund Emerges

Warren Buffett famously bet that index tracking would outperform hedge fund returns nine years ago. The S&P 500 index tracker compounded at 85.4%. The best performing fund of hedge funds it was wagered against achieved 62.8%.

“When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients,” Buffett wrote to Berkshire Hathaway backers. “Both large and small investors should stick with low-cost index funds.”

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Buffett is right: Sooner or later, everything has to evolve on Wall Street.