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The No-Brainer Investor

The No-Brainer Investor

For the investor who wants to skip the hype and just learn how to create a simple, smart and efficient portfolio.

  • Home
  • Introduction
  • Lessons 1-9
    • 1. The Million Dollar Bet
    • 2. The Investment Jungle
    • 3. Don’t Lose Money
    • 4. Stock Picking
    • 5. Mutual Fund Picking
    • 6. Ax the Expert
    • 7. Stay Balanced
    • 8. Summary
    • 9. The Recipe
  • Comments
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  • Bibliography
  • Contact
  • Clay’s Bio

1. The Million Dollar Bet

The Bet5Lesson 1. The Million Dollar Bet:
In 2008, Warren Buffet (3rd riches man in the world) wagered $1,000,000 that he could pick a single mutual fund that in 10 years would outperform a pool of any five hedge funds selected by Protégé Partners–a New York hedge fund company with assets of over 2 billion dollars. (For verification of this story, google Warren Buffet’s Bet or see Business Insider, Feb 2015)
Results After 7 Years:
Buffet selected Vanguard’s S&P 500 Index Fund which so far has returned 63.5% to its investors, whereas Protégé’s pool of 5 hedge funds has only returned 19.6%.
Moral:
(1) In general, financial experts cannot beat the market average, (i.e., S&P 500). And in this case they’re not even close.
(2) Paying experts additional fees for management and/or advice only makes the situation worse. (Hedge funds typically charge 2% for management plus a 20% performance fee on any gains).
Furthermore, hedge funds are restricted to wealthy clients, whereas you or I can hold the Vanguard S&P 500 fund in our own portfolios.
Comments? Go to Web Comments or Facebook Comments. Wanna skip the lessons? Go to Recipe.

Copyright 2014 by Clay Nelson | All Rights (and Wrongs) Reserved.