Active Funds: Why the Wealthy Still Invest In Them

[troubled soul]

History proven that Best way to invest without any headache is to buy some low cost Index fund ...
But when I try to read some Data...I find people still invested in Active Fund with crazy high fee..
What I am missing ? What is the reason the wealthy people still believe in Active Funds ?

Thanks

 

[jafo]

Because the wealthy don't know they are getting bamboozled.
Also, a lot of them don't feel they are competent enough to make investing decisions.
Furthermore, the appeal to false authority has roots in cognitive bias. Most people hallucinate that some special group of "experts" can predict the future for the wealthy, but NOT for themselves.
Moreover, a lot of people with a lot of money prefer to enjoy their time with friends and family instead of handling their own finances.
Guys like Warren Buffett, Charlie Munger, et al don't invest in active funds.
Read the following article. It's a great article with stellar insights, but notwithstanding these results, people still fall for the CONfidence MAN.
Buffett's Bet with the Hedge Funds: And the Winner Is ”¦

 

[JohnnyDoe]

Wealthy and smart people run funds, don't invest in them.

Buffett made another bet btw: An entrepreneur won a lunch with Warren Buffett. Now he's looking to beat him with cryptocurrency

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[jafo]

JohnnyDoe said:
Buffett made another bet btw: An entrepreneur won a lunch with Warren Buffett. Now he's looking to beat him with cryptocurrency
Click to expand...

Sam Ling! And it's exactly what you said above:

JohnnyDoe said:
Wealthy and smart people run funds, don't invest in them.
Click to expand...

Sam Ling is using OPM (Other People's Money) to gamble while skimming HUFE FEES off the top and enriching himself.smi(&%

Reminds me of Dave at Tropical Park Boxing Gym in the early 80s. I was an intl. engineering student with a full academic scholarship, so I wasn't allowed to work in the US, except for 10 hours a week at the computer lab and an exception of an extra 10 hours a week at the Richter Library in the computer room (hourly wage was then $2/hour). For those who know...Sperry Univac, IBM System/370 etc.

I took up boxing when I was 4. Sparring for money, with headgear & body gear for cash under the table, was a way to earn money. People would bet who would win or lose through Dave. My pay ranged between $100 to $500 depending on the opponent.

Dave was the "gambling house". He took 15% off the top. He didn't bet/gamble. After my first money fight, I knew something wasn't right. I calculated Dave profited a huge amount, but this couldn't be right, right? I was an engineering student, after all, I couldn't be this stupid in real life, right? Wrong! After the second fight, I realized that Dave earned +$6500 without as much breaking a sweat! The other heavyweight and I made a total of $1500 (He made $1000, and I made $500. It was against the "law" for me to work outside campus, so.... I . hap¤#"

Sam Ling and his ilk are the Dave of the crypto industry.

Satoshi's paper CLEARLY discourages, or as in my view, PROSCRIBES the use of trusted third parties...like Dave or Sam Ling

Buffett knows this, but Buffett will take ANYONE's money under the right conditionsrof/%

Last edited: Jun 3, 2023

 

[Dreamy]

ETF 50% from our portfolio, and 50% real stocks - this is good idea imo

 

[Deepbarrels]

Dreamy said:
ETF 50% from our portfolio, and 50% real stocks - this is good idea imo
Click to expand...

Which ETF do you hold and why? If you don't mind. Thank you

 

[Dreamy]

Deepbarrels said:
Which ETF do you hold and why? If you don't mind. Thank you
Click to expand...

VOO, VGT, SOXX, VNQ, XLU, XLV - this is quite enough. Covering all US companies and nishes

 

[JohnnyDoe]

Dreamy said:
VOO, VGT, SOXX, VNQ, XLU, XLV - this is quite enough. Covering all US companies and nishes
Click to expand...

And the rest of the world?

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[Dreamy]

JohnnyDoe said:
And the rest of the world?
Click to expand...

History shows that when we talk about corporations and long-term investment in them, the US is the best market. Look at the ETF graph for Africa, Asia - it's kind of a nightmare compared to the US, Europe and other Tier1 countries. There will always be Coca Cola. McDonald's too. Like the Blackrock corporation, which already owns, in fact, some countries.

 

[JohnnyDoe]

Dreamy said:
History shows
Click to expand...

that empires fall

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[Mercury]

JohnnyDoe said:
that empires fall
Click to expand...

Empires, countries, civilizations all eventually fall like us, short-lived human beings. Just that time frames are way different.

At the end of the day, investments are all about forecasting and risks assessment.

Will you be able to enjoy - in good health - the products of your investments before or after the fall?

Last edited: Jun 9, 2023

 

[JohnnyDoe]

Mercury said:
Will you be able to enjoy - in good health - the products of your investments before or after the fall?
Click to expand...

I don't know, therefore I diversify

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[Mercury]

JohnnyDoe said:
I don't know, therefore I diversify
Click to expand...

The wisest play when you can.
Some can't afford yet the price of diversification and need to be a bit more aggressive with investments until they reach a certain amount of capital.

 

[backpacker]

Dreamy said:
VOO, VGT, SOXX, VNQ, XLU, XLV - this is quite enough. Covering all US companies and nishes
Click to expand...

These are equity and RE ETF's. Do you hold any bonds or fixed income ETF's to balance the equity risk?

 

[Paul Tudor Jones]

azb1 said:
History proven that Best way to invest without any headache is to buy some low cost Index fund ...
But when I try to read some Data...I find people still invested in Active Fund with crazy high fee..
What I am missing ? What is the reason the wealthy people still believe in Active Funds ?
Click to expand...

Just because one is wealthy doesn't mean one is immune to marketing.

Usually active funds only out-perform due to survivorship bias (except a very select few)

 

[deepspeculator]

Most active funds underperform indexes in the long term, however there might be still some merit to allocate money into them:
1. Some might be using strategies that are uncorrelated with general market. Thus, they might give positive performance even if general market is crashing.
2. Some might be investing in assets that are impossible to invest on public stock exchanges, and the only way to get exposure is buying something in the real world by yourself (what might be cost inefficient or you might not want to spend time on it) or doing this through active fund.

 

[scooterguy]

Another reason is that sometimes banks force you to buy one of their BS funds as a requirement to open an account... So you put some money in their BS fund so that you can get your account to buy your own ETFs.

An analogy would be Internet Explorer (Edge). Sometimes you need it in order to download Chrome or Firefox.