Gilbert Index

Passive Index Investing

I wrote a piece breaking down the basic elements of Passive Index Investing over at Wealth Meta.

And if you’re happy, curious and enjoy dark chocolate covered raisins, you can find the piece here.

Below is a snippet from the article, a quote by the legendary John (aka Jack) Bogle (the father of Passive Index Investing) in his investment classic Common Sense on Mutual Funds:

The index fund is a most unlikely hero for the typical investor. It is no more (nor less) than a broadly diversified portfolio, typically run at rock-bottom costs, without the putative benefit of a brilliant, resourceful, and highly skilled portfolio manager. The index fund simply buys and holds the securities in a particular index, in proportion to their weight in the index. The concept is simplicity writ large.

And for perspective on what Jack Bogle has meant to individual investors like you, here are the thoughts of one famous investor:

If a statue is ever erected to honor the person who has done the most for American investors, the handsdown choice should be Jack Bogle. For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of added value.

In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.

These words were written by Warren Buffett in his 2016 Berkshire Hathaway shareholder letter.

If you’d like to learn more about Passive Index Investing, a perhaps more approachable alternative to Common Sense on Mutual Funds is:

And as you read and poke the poop, consider one other sentiment Buffett expressed in his shareholder letter:

The bottom line: 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. Both large and small investors should stick with low-cost index funds.

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