$100 billion dollars.
That’s what investors are collectively paying Wall Street every year in an attempt to beat the stock market. This according to the results of a new study, “The Cost of Active Investing,” by Dartmouth Professor Kenneth R. French.
So what do investors get in return? According to Professor French’s research, worse than nothing. In fact, the study finds that if investors had simply invested in a passive market portfolio (ie. index funds) between 1980 and 2006, they would have boosted their average annual return by 67 basis points.
That’s what investors are collectively paying Wall Street every year in an attempt to beat the stock market. This according to the results of a new study, “The Cost of Active Investing,” by Dartmouth Professor Kenneth R. French.
So what do investors get in return? According to Professor French’s research, worse than nothing. In fact, the study finds that if investors had simply invested in a passive market portfolio (ie. index funds) between 1980 and 2006, they would have boosted their average annual return by 67 basis points.
And as we've written about before, Small Percentages Add Up To Big Money.
There’s an excellent article in the New York Times that examines this study in more detail. The bottom line?
“The best course for the average investor is to buy and hold an index fund for the long term. Even if you think you have compelling reasons to believe a particular trade could beat the market, the odds are still probably against you. “
You can read the New York Times article here.
There’s an excellent article in the New York Times that examines this study in more detail. The bottom line?
“The best course for the average investor is to buy and hold an index fund for the long term. Even if you think you have compelling reasons to believe a particular trade could beat the market, the odds are still probably against you. “
You can read the New York Times article here.
You can download Professor French's study here.
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