Time to get out of the Maze
Time to get out of the maze.
Finding the right strategy.
You may have landed here due to reading an article, having a bad experience with actively managed investments, or just by being inquisitive. There is good chance that the word ‘indexing’ represents a lot of different ideas to you and perhaps raises many questions.
Many investors, amateurs and professionals alike, still believe that they can beat the ‘index’ and invest using their own ‘system’, an ‘active manager’ or a ‘program’ they have purchased.
If you have followed that path and it didn’t work… keep reading. This quick read may make you feel better, and smarter
John Bogle who founded Vanguard in 1974 was originally derided by competitors and peers. Vanguard went on to become one of the largest fund managers and surpassed all those who originally questioned his wisdom to launch an index fund.
Vanguard launched its first fund in 1975 with $11 million and went on to become the largest mutual fund manager in the world with $11.3 trillion AUD managed as at August 31, 2021!
Yes, 1975 was 47 years ago, and there are 11.3 trillion reasons that indexing is not such a bad idea.
It doesn’t make much sense why so many investors pay high active fees. But they do and will continue to do so in search of that one super star fund.
Is that the smartest way to invest when there is so much evidence pointing you in another direction – the right direction?
Time, and managers like Vanguard and Dimensional Fund Advisers have proven that you can invest successfully using low cost diversified funds. In fact, by using this approach you are far more likely to succeed than by using active funds.
Sure, a small percentage of active funds will perform ok this year, but what about next year, and the year after that? Still sure?
The good news for you is that investing in funds like Vanguard and Dimensional is not new and all the questioners and doubters have been well and truly proven wrong.
How many times in life do we ignore the obvious facts and go with another approach only to regret that decision. Now, when buying a Fridge or a TV, it’s not going to have a huge impact on your life, but, when the purchase affects your investment returns and your future lifestyle – we are talking about a big impact.
New ideas are not always easily accepted as we tend to hold on to our old beliefs. Have you read “Who moved my Cheese?’ by Dr Spencer Johnson and his follow up novel “Out of The Maze”. They are worth a read.
Whether you are a new investor or an experienced investor, indexing may be ‘new’ to you but it’s really not that new at all. Discover what’s out of the maze. Are you ready
To take control of your finances and learn more about investments than most financial planners dare to discover check out Scientiam for more readings and insights on how markets really work and how as an investor you can learn how to really invest and not gamble.
It’s your future.
Here’s to smart investing using science not guesswork.
For a quick definition and history of index funds, check out: