#290 Stop Trying to Beat the Market: Use Index Funds


Stop trying to beat the market, because you can't. That sage advice comes from investment legend Charley Ellis, who has been keeping tabs on the debate between active and passive investment management for five decades. In his new book “Index Revolution: Why Investors Should Join it Now” Charley argues that indexing is the most efficient and cost effective way to achieve your long term financial goals. He states it clearly: “The stunning reality is that most actively managed mutual funds fail to keep up with index funds.”

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Ellis founded Greenwich Associates in 1972, creating a financial industry consulting firm that would become a go-to resource for the biggest fund managers and Wall Street firms. One of his many claims to fame is that he was the first industry insider to publicly proclaim that most active portfolio managers do not keep up with the benchmarks they are trying to beat, and that investors are better off in low-cost index funds. That admission occurred in 1975, when he wrote a timeless article, titled The Loser’s GameIn the article, he explained the quandary that active managers face and quantified their disappointing results. It was the same year that Vanguard launched the first index mutual fund. In addition to writing and talking about the industry, Charlie serves on as an Investment Committee member of Rebalance IRA.

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