Absolute Wealth Investors have been recommending low cost index funds a key component of private wealth portfolios since our inception over a decade ago. We continue to support them as a sound investment option - and here's why.
According to Morningstar for the first time ever in the US, over the past month, the amount invested in index based equity funds (including ETFs) exceeded actively managed equity funds. Back home in Australia, the ASX 200 index beat 93% of general equity managers in the last year on an absolute return basis and 96% on risk adjusted returns*. Scott Tully, General Manager of Investments at Colonial First State (a business built on active management) recently told the Australian Financial Review**: "At June 30, the index was in the top quartile of Aussie equity managers but probably worse, the underperformance of other fund managers was pretty extreme, probably the largest we've seen in two decades."
WHAT DOES THIS MEAN?
The above figures are showing what the world's greatest active investor, Warren Buffett has always known....that people (like him) who can actively choose individual stocks, trade the market and outperform the index are like unicorns. Very few people get it right consistently. For the rest of us there is much to be said for a simple, long term approach to investing in the overall index - specifically low cost index funds. In his praise of investing legend Jack Bogle, Buffett states
For decades, Jack 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 investors large rewards while delivering them nothing of added value.
Helping clients make simple, understandable and proven investment decisions is core to what we do. It not always necessary to overly engineer your money in order to secure good returns relative to the overall market. If you'd like help to understand or invest in funds, or if you'd like some more information to drill down on the facts and figures please drop me an email paul.barrett@absolute.sydney.
* Source: according to the S&P SPIVA Report ( June report card ) on active managers in Australia. **https://www.afr.com/wealth/personal-finance/why-investors-are-shunning-active-and-chasing-passive-20190923-p52tyc