Indexing: How to Win the Loser’s Game [Part VI]

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Indexing: How to Win the Loser’s Game [Part VI]


The fund management industry won’t tell you this, but all the evidence points to the humble index fund being the most appropriate investment vehicle for the vast majority of people. And there are few advocates of indexing as staunch as Warren Buffett – the most famous active stockpicker of all.

Indexing: How to Win the Loser’s Game

Indexing: How to Win the Loser’s Game – Transcript and References

Last time on How to Win the Loser’s Game…

Seth Klarman’s 2021 Letter: Baupost’s “Never-Ending” Hunt For Information

Baupost's investment process involves "never-ending" gleaning of facts to help support investment ideas Seth Klarman writes in his end-of-year letter to investors. In the letter, a copy of which ValueWalk has been able to review, the value investor describes the Baupost Group's process to identify ideas and answer the most critical questions about its potential Read More

So, how can ordinary investors apply the academic evidence – the lessons learned from more than a hundred years of rigorous research? How can they apply that to achieving their financial goals?

Well, this might sound dramatic, but the work of Louis Bachelier, and of Nobel Prize-winners like Samuelson, Sharpe and Fama, should make us question almost everything we thought we knew about investing; and almost everything the financial industry and the media tell us we should be doing.

Most of all, the evidence should make us extremely wary of anyone who claims that they have the knowledge to beat the market. Because markets are fundamentally efficient, consistent outperformance is almost impossible.

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