Index funds are per se not a bad investments. You just have to invest in index funds in a smart way. I share what matters when it comes to investing in index funds and other types of investing.
Index Fund Bubble Explained – How To Invest (in Index Funds)
Here’s what Charlie Munger had to say at the Daily Journal meeting
Charlie Munger spoke at the Daily Journal Corporation's Annual Meeting of Shareholders today. Although Warren Buffett is the more well-known Berkshire Hathaway chief, Munger has been at his side through much of his investing career. Q4 2020 hedge fund letters, conferences and more Charlie Munger's speech at the Daily Journal meeting was live-streamed on Yahoo Read More
Good day fellow investors. Since Dr. Michael Burry discussed how index funds are in a bubble and creating a big danger comparing it to the 2008 crisis. The topic on the index fund has been really, really hot on YouTube. And all the videos really reached lots of views. However, I looked at a few videos just out of curiosity.
Ben Felix discussed how price is not set by index funds by by but by trading, which is correct on the short term on the long term it can be discussed. And his conclusion is how you have to be underweight, large caps and overweight, small caps, which isn't again, anything spectacular or anything that really adds value.
Then Stefan Graham said he spent 10 hours on research, researching whether it is a bubble or not. And his conclusion is that index funds are cheap, are the best way to invest, you can beat the market and will get a good return out of investing in index funds. And I really want to give hear a perspective that really adds value? Not from 10 hours of research, but from 20 years of investing experience practical investing experience a PhD on the subject.
So I think really I can add value to your investment returns over the long term, which is the key, not about what will happen. Is it a bubble or not? Let me tell immediately, it doesn't matter whether it is a bubble, you can know something is in a bubble only after the bubble pops. If it doesn't pop, it isn't a bubble. If it pops, it is a bubble. Very simple. So it doesn't really matter.
Let's discuss some topics that really add value to your decision making when it comes to investing because that's what all that matters when you invest in either index funds or stocks. It matters how will that help you reach your financial goals in the long term, and that's all that matters. So if you focus on your financial goals, if you want to focus on them, please subscribe. click that like button for the YouTube algorithm to help support the channel.
Passive vs active
Let's start with The topics are first explained the index fund bubble, whether passive is better than active, should you stick to index funds?
Or should you look at other options output index fund investing in under or option into your investment perspective, I'll show you what to expect from various investment opportunities out there, put it in the bubble perspective or not bubble perspective, give you a long term outlook, what give you the free key arguments when it comes to investing whatever you're investing in, that will help you decide what is best for you in the end, because that's the only thing that matters. underweight, overweight weight, overvaluation Bible, this or that doesn't mean anything.
The only thing that matters is what's best for you. So let's start. So what is the bubble when it comes to bubble you can only say something is in a bubble after it bursts. If it doesn't burst. It isn't a bubble in 2006.
Nobody was discussing the real estate bubble or just mentioned here and there when it bursts became a hot topic over the last 10 years. Because its burst. However, let's look at all transaction house price index for the United States. It's much, much higher than it was in 2007, peak 2008. And now few discuss, oh, it's a bubble, it's danger, the economy will collapse because these are dead and cetera. So a bubble is only a bubble.
Market bubble? Invest in index funds
If it bursts. If it doesn't burst, or there is no out of that it will burst or nobody mentioned it, then it's never a bubble. And if you look at real estate prices, for example, how those exploded over the last 4040 years, you would say you can run around saying this is a bubble too, but it all depends on whether it will burst or not. If it doesn't, it was never a bubble.
What you have to focus is on what are the fundamentals driving prices in relation to value and what will your investment returns be? So index funds are the new kings of Wall Street So is there a new index fund bubble? More than 50% of fund managed assets are now passively managed. And then people say okay, passively managed not thinking just pushing in those large caps are creating a bubble, we will see whether that will be a bubble or not.
But what's important is whether this is something for you or not. And then we can discuss the topic of passive investing into index funds or active investment. Active investments, you control what you do or you give someone the control passive investment, you simply invest in index funds, and the hot topic is that index funds have destroyed most of the active managers over the last 45 years. So therefore, the index fund investing topic is very hot. Now, if we look at index fund performance versus active performance versus their benchmarks, on average, just 10% of actively managed.