I2,
>Over the past 25 years, the S&P 500 index has rather consistently
>outperformed the majority of general equity funds. Despite
> this fact, many investors are still attempting to find
> better value by buying non-index funds. This was the
> reason for my question.
As a recovering Investor-holic, I should agree with
you. Yet, some part of my human nature tries to convince me that
active stock investors should be able to outperform the
market index. In fact, Buffett's record shows that it's
possible. That is the only reason why I continue holding
non-index mutuals and stocks of individual companies.
It may be an exercise in futility, but I'm not ready
to admit it yet.
There's also an interesting connection to the
discussion about "world's greatest investor" here. Someone
claimed that Bill Gates is the "world's greatest investor"
because he held the MSFT stock through all these years.
However, this means only that Gates is a great business owner.
Buffett said that he always looks at owning stock as a
partial business ownership, and that he does not sell the
business just because someone offers a good price for it,
or just because the business has subpar returns.
If you look at investing in this way, you are
most likely to underperform the selected index. Most
businesses have not grown as fast as the S&P index.
Does this mean that you should sell partial ownership in them
and move on to the better pastures? It's up to you.
Good luck
Jurgis |
