What's the evidence for low cost/indexed investing? Good question. There is lots and it is varied. We'll eventually look at most of it in one form or another in this blog. But one type I'd like to look at here is less academic and more real world. It looks at what institutions do. It mirrors my experience as an advisor for the multi-billion dollar multi-employer United Mine Workers Health & Retirement Funds in Washington D.C. during the 1980s. There we did a lot of work to try to identify the "best of the best". Consultants brought us the best managers in terms of outperforming the S&P 500. We chose the best 3. Guess what? After 5 years, their return was below or close to the S&P 500 when looked at in the aggregate. This got us to move into low cost indexing.
When you look into institutions, you realize they have large staffs of analysts to advise the Trustees. You see that they spend most of their time focused on how they can enhance investment returns. They utilize the top consultants in the investment arena. Clearly, their actions speak loudly.
So what do institutions do? Dan Solin, on page 100 of "The Smartest Investment Book You'll Ever Read", lists the following as having "over $50 billion invested to achieve market returns:
-California Public Employees Retirement System
-New York State Common
-New York State Teachers
-Florida State Board
-City of San Diego
-State of Maryland
-State of Utah
-Los Angeles City Employees Retirement Association
The list continues with educational institutions and other organization types, but you get the message.
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