The Index Fund Scam

➜ In this video we’re talking about the differences between investing in individual stocks vs index funds.
You've probably heard that research shows Active stock-picking largely does not out-perform Index Fund investing.
The most recent stats for the United States shows 82.51% of actively managed funds underperformed the S&P 500 index.
To add insult to injury, research further shows that even for the funds that do manage to outperform the S&P 500, it's unlikely for them to be able to continue this over-performance:
With only 41% of them being able to continue to be within that top half of Performing funds.
But let’s look at the other side of this:
Ted Weschler is an investment manager for Berkshire Hathaway and manages $13 billion of the Berkshire portfolio.
he grew his Roth IRA personal investment account from $70,000 to $264 million between 1989 and the end of 2018 investing only in stocks that were generally available to the public.
But since joining Berkshire Hathaway where he’s s now managing $13 billion dollars of the Berkshire portfolio... he has failed to outperform the S&P500.
And the reason is because of the SIZE of his portfolio now at Berkshire.
Guess who else is restricted to only looking at the largest companies? Virtually every money manager that can’t beat the S&P 500.
Guess who is not? You and I!
The largest companies have a lot of eyes on them and there is a lot less opportunity for any one of them to become significantly underpriced.
Smaller companies however have a lot less competition around them and are much more susceptible to being mispriced by the market.
Although index funds are low cost - there is an opportunity cost to buying them: Average is better than below average but average will never be extraordinary.
If you learn how to Pick individual stocks then you do have a chance to make extraordinary returns.
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Special thanks to my incredibly beautiful, smart, and creative girlfriend, Stephanie, for her editing wizardry and creative insights and ideas. This isn't possible without you.
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[@stksport]

Interesting video with very good examples!

[@IntelligentStockInvesting]

Glad you liked it!

[@tek1z]

awesome video , thank you Richard

[@IntelligentStockInvesting]

Thank you! :) Glad you enjoyed it!

[@catherineevel6899]

Super interesting 🤔
Everyone should start investing while in high school!

[@IntelligentStockInvesting]

I agree! Thanks for watching :)

[@danguee1]

When it comes to compounding, the earlier the year of investing, the more important it is to eventual wealth.....