Indexing – The Media Catches up with 1932

If you read the financial media, you’ll bump into coverage of the benefits of index funds or passive funds.

They always make it sound like it is a major breakthrough.  ALERT: We have found some evidence that index funds do better than your expert investment manager.

In other words, the experts, to whom you might pay a lot of money to manage your assets, generally do worse than the simple averages.

Here is a decent video, posted today, of one such story.

Flash back 80 years

The sad part of all of this is that it is not a “new” story. I liked the study the first time it came out……in 1932. Or when it was published again in 1967.

And since that time it has been done over and over and over. The bottom line – it is a much smarter bet to go with a portfolio designed to capture the market averages than to pay an investment manager to attempt to beat those averages.

The evidence supporting this is so robust that it is basically irrefutable at this point – which is why it is so bizarre that it is still treated like a “new” story.