How index funds work: why doing nothing beats most experts
Why investors earn less than their own funds: the hardest part of an index fund
An index fund asks for no skill at all. Still, on average, investors earn less than the very funds they own. How can that happen, when the fund is the same for everyone?
-
1
In year 15, the market crashes. In a few months, your statement falls by a third. Your index fund owns all 500 companies, so it falls with all of them.
-
2
Miva has owned an index fund since Rono's story, three years ago. She looks at her loss and wants to sell, then buy back "when things are calm again". You leave yours where it is.
The rest of this episode is for subscribers
Subscribe to read every premium episode. You can cancel when you want.
Paid yearly: $99 instead of $119.88