don’t jump ship in response to the noise by signing a Ulysses Pact. This pact allows investors to agree up front that they will not act on emotions that can lead to irrational and wealthdestroying decisions. It can serve as a promise to one’s future self to follow a passive advisor’s counsel to hold on and not buy or sell as a reflexive reaction to the short-term gyrations of the market.
Legendary Investors Agree On Index Funds
Renowned investor Warren Buffett is an advocate of index investing. Most recently, in his 2014 letter to shareholders, Buffett stated that he has directed the trustee of his sizeable inheritance invest in just two investment vehicles: 10% is to go into short term government bonds, and the 90% balance to simply go into index funds19. Buffett’s affinity for indexing is not new news. For many years, he has promoted index investing in several of his letters to shareholders. For example, in his 2004 letter, Buffett stated that “Over [the past] 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback corporate America in a diversified, lowerexpense way. An index fund they never touched would have done the job. Instead, many investors have had experiences ranging from mediocre to disastrous.”20 Buffett not only advocates index funds, he’s betting on them. The June 2008 issue of Fortune21 Magazine reported that Buffett wagered a million dollars that an S&P 500 index fund’s ensuing 10-year returns would beat those of five actively
This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with i...