The Bet That Proved Passive (Index) Investing is Superior to Active Management

Gambling Verses Investing

Warren Buffett the CEO of Berkshire Hathaway is one of the most successful investors of all time, he is also known as the “Oracle of Omaha.”

In a 2005 letter to the shareholders of his company wrote that active management professionals (hedge fund managers) not outperform individuals who used a passive (index) investing strategy over a ten-year period. To prove his sincerity in this belief he offered $500,000 (for charity) to anyone willing to accept his challenge.

Warren Buffett believed the large fees from active managers was not worth the cost. That in fact the exorbitant fees only enrichen the finance industry and hurt the consumer.

In 2007 hedge fund manager Ted Seides accepted the challenge. Buffet chose a low-cost Vanguard S&P fund and Seides picked five funds-of-funds with interests in more than 200 hedge funds to go up against Buffett. The official amount for the bet was 1 million dollars.

In December 2017, Buffett claimed victory, noting that the final tally has been an “eye-opener.” Buffett’s pick of a Vanguard S&P index fund delivered an average annual return of 8.5% compared to the fund-of-funds’ 2.4% average annual gain.

By the end of the bet on the $1 million invested in the funds chosen by Seides would have gained $220,000 in the same time period that Buffett’s low-fee investment would have earned $854,000.

Any individuals who invested in these hedge funds also lost out on making money. While at the same time the individuals running the hedge funds enjoyed “earning” their outrageous fees.

“Performance comes, performance goes, fees never falter.”-         Warren Buffett

Warren Buffett pointed out that:·        Making money on the stock market; "Does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon."·        "What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals."·        "Stick with big, 'easy' decisions and eschew activity.”·        Buffett also sought to make it loud and clear that he doesn't think the exorbitant fees that hedge funds charge are worth it.

Buffett acknowledged a lesson learned from an interesting plot twist over the course of the bet.·        At the outset of the wager, Buffett and Seides bought about $300,000 worth U.S. Treasury bonds, widely considered a safe investment.·        The expectation was that the bonds would grow to about $1 million at the end of the decade, and the winner would claim the prize pool for charity.·        But, the bonds gave back "pathetic" returns, Buffett wrote.

Bonds

·        "Bonds had become a dumb -- a really dumb -- investment compared to American equities" or stock, he said.·        So, in 2012, Buffett and Seides dumped their Treasury bonds and used the money to buy B-class shares of Buffett's Berkshire Hathaway (BRKB).·        By the end of the bet, the Berkshire shares were worth $2,222,279 -- about $1.2 million more than they'd hope to earn with the bonds.·        In short, the "purportedly 'risk-free' long-term bonds" ended up being a "far riskier investment" than common stocks.

Bonds  Continued

Warren Buffett gave $2.2 million to the charity Girls Inc. of Omaha, Nebraska, after winning a 10-year bet that hedge fund managers couldn’t beat the stock market average, reports the Omaha World-Herald.

John Clifton "Jack" Bogle (May 8, 1929 – January 16, 2019) was an American investor, business magnate, and philanthropist. He was the founder and chief executive of The Vanguard Group, and is credited with creating the first index fund. An avid investor and money manager himself, he preached investment over speculation, long-term patience over short-term action, and reducing broker fees as much as possible. The ideal investment vehicle for Bogle was a low-cost index fund held over a lifetime with dividends reinvested and purchased with dollar cost averaging.

“If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle.”-         Warren Buffett

For more insight and information on passive (index) investing a good source is Jack Bogle’s book:<ul><li>Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor</li></ul>

“Net return is simply the gross return of your investment portfolio less the costs you incur. Keep your investment expenses low, for the tyranny of compounding costs can devastate the miracle of compounding returns.”-         John C. Bogle

“Wise investors won't try to outsmart the market.”-         John C. Bogle Attempting get rich schemes may very well lead to going broke quickly.Trying to get rich quick is gambling it is not investing.

Attempting get rich schemes may very well lead to going broke quickly. Trying to get rich quick is gambling it is not investing.

Investing Verses Gambling

<ul><li>Don't save too much as a kid rather use your money to enjoy your time, spend time with friends travel</li><li>You shouldn't because over time the amount of money you make increases</li><li>The amount of money you save is going to be small compared to the amount you make now.</li></ul>

Don't save too much as a Kid

<ul><li>Open an investment account so that you know what the process is like</li><li>Gain knowledge of how the investment process works.</li></ul>

Try and Open An Investment Account

<ul><li>Put a little bit of money into Crypto just to learn about it</li><li>Use Coinbase or any other platform that can help you explore and learn</li><li>The educational value is very high</li></ul>

Invest In Crypto

<ul><li>Make sure that you are putting money and time into books and courses to learn more</li><li>Learn Useful and In-demand skills. Learning to Code is still one of the most quick way to learn how to make money</li></ul>

Invest In Learning

Build a Faselane MindsetRead the book the millionaire Fastlane to get a mindset that can help you make moneyFollow me for the book summary coming soon!

Investing Your Time

<ul><li>Document your journey through many different ways it helps build the craft of writing</li><li>You might build an audience.</li></ul>

Document Your Journey

<ul><li>Read books on how to make more money</li><li>4 Hour Work Weeks</li><li>Dying with 0</li><li>Your money and your life</li></ul>

Become money literate

<ul><li>Try and build a business like selling lemonade, selling candy, or building websites</li><li>Turn your active income into passive income</li></ul>

Try and Build A Business

Wow, this gave me a ton of different advice, follow me for part 2

The first 1,000 people to use this link will get a 1 month free trial of Skillshare: https://skl.sh/aliabdaal04229 Hey friends, this video is about how to invest as a teenager: basically the advice I’d give my 15-year-old self. You might be fairly broke, but that doesn’t mean you can’t build good money habits + make decisions that’ll pay off further down the line. How to Invest for Beginners - https://www.youtube.com/watch?v=gFQNPmLKj1k The Best Book I've Ever Read about Making Money - https://www.youtube.com/watch?v=Gx2vyi4JcV0 The Book That Changed My Financial Life 🤑 - https://www.youtube.com/watch?v=Gg8_TA7U0Uw Revealing My Investment Portfolio - https://www.youtube.com/watch?v=MgI6iquuuzA&ab_channel=AliAbdaal Bitcoin for Beginners (2021) - https://www.youtube.com/watch?v=hXkiAfjFtgU The best summaries of books (Shortform) - https://go.aliabdaal.com/shortform 00:22 Part 1 - Investing your money 00:24 1. The dangers of saving too much 01:39 2. Investment accounts 02:54 3. The power of index funds 03:57 4. Crypto? 05:19 5. Leveling up 06:30 Part 2 - Investing your time 06:45 1. Build a fastlane mindset 07:42 2. Learn useful and in demand skills 09:08 3. Document your learning and your journey i. 10:55 4. Learn about video production 12:45 5. Become money literate 13:57 6. Get a job or work experience 14:30 7. Make things for people you admire, for free 15:42 8. Find a way to build a business 16:45 9. Turn your active income into passive income 18:44 10. Consider outsourcing some work MY FREE ONLINE COURSES: 🚀 Productivity Masterclass - Principles and Tools to Boost Your Productivity - https://go.aliabdaal.com/course/productivity 🎬 Video Editing with Final Cut Pro X - From Beginner to YouTuber - https://go.aliabdaal.com/course/video-editing 🎓 How to Study for Exams - An Evidence-Based Masterclass - https://go.aliabdaal.com/course/studying PART-TIME YOUTUBER ACADEMY: 🍿 My 6-week live online course - https://academy.aliabdaal.com MY FAVOURITE GEAR: 🎥 My YouTube Camera Gear - https://kit.co/AliAbdaal ⌨️ My Keyboard - Wireless Coral mechanical keyboard (Cherry Blue) - https://go.aliabdaal.com/keyboard 📝 My favourite iPad Screen Protector - Paperlike - https://go.aliabdaal.com/paperlike 🎒 My Desk Accessories + Todo List - Ugmonk - https://go.aliabdaal.com/ugmonk MY FAVOURITE SOFTWARE: ✍️ The best summaries of books (Shortform) - https://go.aliabdaal.com/shortform 📚 How I remember what I read (Readwise) - https://go.aliabdaal.com/readwise 🎵 Where I get my Music (amazing for YouTubers) - https://go.aliabdaal.com/epidemicsound 👻 Where I get my Website Themes from - https://go.aliabdaal.com/ghost-themes 👻 My personal Ghost Website Theme - https://go.aliabdaal.com/ghost-theme-ali 🎙 My weekly podcast - https://www.notoverthinking.com My brother and I host a weekly podcast where we discuss happiness, creativity and the human condition. You can find it by searching “Not Overthinking” on any podcast app (eg: Spotify, Apple Podcasts, Google Podcasts etc). BE MY FRIEND: 💌 Sign up to my weekly email newsletter - https://aliabdaal.com/friendzone/ 🌍 My website / blog - https://www.aliabdaal.com 📸 Instagram - https://instagram.com/aliabdaal 🐦 Twitter - https://twitter.com/aliabdaal 💙 The Friendzone Discord - https://discord.gg/Dh2kGavffd 🎮 Twitch - https://twitch.tv/aliabdaal WHO AM I: I’m Ali, a YouTuber, podcaster, soon-to-be author and ex-Doctor working in London, UK. I make videos that explore the strategies and tools that help us live happier, healthier and more productive lives. I also have a weekly podcast called Deep Dive (https://www.youtube.com/channel/UChfo46ZNOV-vtehDc25A1Ug), and I write a weekly email newsletter that contains some quick thoughts + links to interesting things (https://email.aliabdaal.com). GET IN TOUCH: If you’d like to talk, I’d love to hear from you. Tweeting @AliAbdaal directly will be the quickest way to get a response, but if your question is very long, feel free to email me at hi@aliabdaal.com. I try my best to reply to things but there sadly aren't enough hours in the day to respond to everyone 😭 PS: Some of the links in this description are affiliate links that I get a kickback from 😜

Investing Advice for Teenagers (2022)

Investing in your 20s is one of the greatest steps you can take toward being a bona fide, successful adult. It pays to get a jumpstart on saving for financial goals like retirement, especially because of compound returns.

Why to Invest in Your 20's?

As The topic comes of Investing many people avoid Themself by saying that, I Don’t Earn so I Don’t Invest. I Hope every Month you are Get Pocket Money, Right. So Some Portion it. You have to save. Stop doing UnWanted Expenditure, If you cant then start to Reduce It Month by Month. It Will help you to Save Money As well as you can Invest that Money.

1. Save money as you can:

Nowadays we all are getting very strictly Bonded with time. So we Prefer to have a Personal Bike or Car. The best way to solve this problem is to Book A Cab or Bike Rider, This thing is now getting Popular Day by Day. But if You think you won it then whenever wherever whatever you can do with it. So if you want to purchase then purchase second hand, it will help to your pocket. You can have your new bikes and cars if you are setting on the peak of your finances then you can go with it.

2. Don't buy bikes and cars (if you want to purchase then purchase second hand):

Debt, Loan, Credit Card; these 3 things are very Dangerous financial Enemies of our Youth. Do take a Personal Loan or any kind of loan if it is not very important, especially when you are a Student. Same with Credit Card.

3. Stay away from debt, loans, credit:

Again very Important But many people & Youth are Ignoring it. Especially it is very important in the period of This kind of Pandemics. As a youth, if assume if something is Happened to you (May God Keep you Well) But if you needed to hospitalized then you know how the bills come Right. So Plz make sure to have Health insurance for you & your Family Along with your Term Insurance. It Will Helps your Family & You.

4. Health insurance:

As a Student, you have to do this by Investing not Trading. One of the major benefits of investing in the stock market is that investors get the chance to earn more money Over time if the stock market rises in value, the prices of a particular stock can rise or fall. However, investors who have put their money in stable companies will see profit growth. If you Don’t have the time to make Research then Invest in those products which u use in your daily life.

5. Invest in the stock market (invest in those products which u use in daily life):

As Now I am Assuming that you are 18+ then make sure to manage your Portfolio by yourself. Because when you invest & after some time you will forget it. So Managing a portfolio is Important.

6. Managing portfolio:

So, why is budgeting important? In short, budgeting is important because it helps you control your spending, track your expenses, and save more money. Additionally, budgeting can help you make better financial decisions, prepare for emergencies, get out of debt, and stay focused on your long-term financial goals.

7. Budgeting:

Investing in yourself will boost your confidence in your abilities and have a positive impact on your self-esteem. As well as equipping you with new knowledge and skills, focusing on your personal development will help you get to know yourself better. Simply you can do this By Following our Profiles where we post this Kind of Content that will Add Value to your Life.

8. Invest in yourself (must):

"You have to Learn how to Spend the money Before How to Save the Money"

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Promo

Its never the late for investing.  Because Age is just. a Number.

You Can Still Do this If you Want. at any Age.

Investing in your 20s is one of the greatest steps you can take toward being a bona fide, successful adult. It pays to get a jumpstart on saving for financial goals like retirement, especially because of compound returns.

Financial 

How to Invest in your 20's? | Complete Guide

Always when you speak to some Then make sure to Mention their Name Instead of (Bro, Buddy, ETC). It creates a culture of respect, recognition, and consideration for the discussion.

1. Call People by their name:

Writing an Email to yourself isn’t just a fun exercise for writers; everyone can (and should!) give it a try. You might wonder what should go in a letter to yourself, but the answer is, anything that is important to you! <a href="https://audiobookmc.blogspot.com/2022/02/why-you-should-write-letter-mail-to.html">Click Here to Read More.</a>

2. Write emails to yourself in the Future:

Don’t try to remember all the things Because remembering all the things is not easy stuff & Human brain isn’t made for it. So, let the things go according to Brain.

3. Do not try & remember everything:

When you Wake up then just do smile in front of the mirror & say to yourself Awesome it will help you to build Confidence & Most important is Self Love.

4. Wake up and smile at the mirror(Awesome): 

Meeting new people every week will help you to increase Your communication skill, Confidence in facing new people, & with this, you get to learn some new things from the next person. You Might do this via; Video Conference, One on One, Email, or anything which makes your Conversation.

5. Meet someone new every week:

Reading is also called the path for success, don’t keep Big Target's just start with daily 30min of reading a book or whatever you want which will help you to increase you Knowledge. after this you can increase your time according to you.

6. Read 30 minutes every day without setting any goals:

Being Gratitude is a life-changing skill in itself, it shows about your personality & your social character. It is also important because nowadays we are taking people for granted, So we have to change this mindset.

7. Say thank you even if they’re not listening to you. (Gratitude):

This means that you are should depend on your luck, you have to search for it because nothing is gone come to you on the base of luck. So, you have to daily do stuff that keeps your Energy on Full-High As well as your Motivation.

8. Don't leave inspiration to chance:

It is Not Important how much you Invest It is how Consistently you Invest, Investing is an effective way to put your money to work and potentially build wealth, Smart investing may allow your money to outpace inflation and increase in value. The greater growth potential of investing is primarily due to the power of compounding and the risk-return tradeoff. So, due to this, you have to make sure to invest every Month, Especially in your 20’s because by the age of 40-50 you are sitting on such a big Corpus you even can’t imagine it.

9. Invest every month:

Many decisions we take with Emotions like when every we are buying a car, house, phone &, etc. I am not telling you that it is not a good decision to have these things. But the point is that think about it wisely take your own time & make a Practical decision. To make a Practical decision you can use Excel Sheet to cross Check your decision.

10. Know and learn numbers before emotions:

Everyone has their own Problems But some problems are there which don’t let you sleep at night. I know that you have been Trying to short this problem but due to the issue of Procrastination, you haven’t done it. <a href="https://audiobookmc.blogspot.com/2022/01/8-tips-to-avoid-procrastination.html">Click here to Learn More about Procrastination.</a>

11. Do something about the problem that doesn't let you sleep at night:

Breathe deeply this is one of my regular based activity. Whenever you Get Anger, Confused, Pressure, Stress, or any other Situation in which your brain feels Out. then take a deeply Breathe. it will work like Clearing the ram of your phone to Brain, it will suddenly start working with more Energy. this can also work as Quick Meditation if you do Meditation regularly.

12. Breathe deeply(Sudden Meditation):

Nowadays we many of are working remotely from our comfort zone but after some we get Bored, it just because our sub-conscious Mind gets notified when you wore Cloths which you mainly ware after work(Shorts, Tees &, etc) or Night ware. So, you make sure to wear proper clothes which you ware for your Office or any other Formal ware & Also this will help you to get into proper Disciplined manner. Same for the Students.

13. Dress up nicely every day (Keeps You Disciplined):

Compliment People when they do something which touches your heart then you always make sure to Compliment that person because your few words will help to & Inspire them to work on it. This Process will transfer the Positive Energy & When you transfer the Positive Energy Eventually you are also Getting it Back.

14. Compliment people:

When we hear the word Workout then we get Flashed by the GYM. So, it doesn’t mean just GYM anything which involves to physical activity like walking, Running, Dancing &, etc. One of the worst things you do is Messing with your body eating anything like junk food, no proper workout, etc. ( from the Personal Experience)

15. Workout every day (because health is no.1 priority):

The Pomodoro Technique is a Time management system that encourages people to work with the time they have—rather than against it. Using this method, you break your workday into 25-minute chunks separated by five-minute breaks. ... After about four pomodoros, you take a longer break of about 15 to 20 minutes.<a href="https://deepstash.com/idea/188787/rule-no-14-pomodoro-technique"> Click here for more.</a>

16. Use Pomodoro technique(can also work in a lazy situation)(25+5 Rule):

Nowadays we are just following anyone on social media or in the world of WEB 3.0, we have to just follow those people who are adding value to your life, those who add Knlowedge to your Infinite brain, you have to fill your brain with the Right Kind content. “Don’t run behind the Short time Pleasure Walk with Long term Pleasure, Happiness, Well-being & Kind.”

17. Follow only positive people:

Making a proper routine will help you to get Maximum things Done on time. <a href="https://audiobookmc.blogspot.com/2022/01/15-rules-for-productivity-in-study-work.html">Click here to read more about it</a>.

18. Follow a routine(Keeps You In Discipline): 

Meditation can give you a sense of calm, peace, and balance that can benefit both your emotional well-being and your overall health. And these benefits don't end when your meditation session ends. Meditation can help carry you more calmly through your day and may help you manage symptoms of certain medical conditions.

19. 15-20 Minutes of Meditation Daily:

Sit at a place where no Disturbance With the Focus and calm & Ask yourself one question that ‘what I am doing wrong & I know it, it is Wrong. Because when we ask this question we Realise the Truth, the very bitter truth, that truth which presents a solution to us, which we may not want to hear, but it is Important for us, We always know that something is not going right with us, we Always know that we are doing something wrong, but we don't want to accept it. We just never want to accept it, we never want to admit it & that becomes the reason Why we Struggle & fail in life.

20. Ask yourself, what am I doing wrong that I know that is wrong? 

“Don’t run behind the Short time Pleasure Walk with Long term Pleasure, Happiness, Well-being & Kind.”

Namaskaram, This a Quick Guide for Teenagers  "20 Habits you Should Know & Follow in Your 20’s" hope this will help you.

Self Improvement

20 Habits you Should Know & Follow in Your 20’s

Stock prices & business profits are not at all linked in the short-term, but they are 100% linked in the long-termWatch the business, not the stock

It's a FAR bigger mistake to sell a mega-winner early than it is to hold a mega-loser too long.

Compounding pays off the most in the out-yearsOptimize for longevity first, everything else second

In the beginning, focus the vast majority of your effort on boosting your income & savings rate

Analysis paralysis is realOnce you know enough, decide.

The P/E ratio is only useful when a company is fully optimized for profits (stage 4)It's most deceiving in stages 3 & 5

If you rarely sell, your portfolio will concentrate itself

Invest with CEOs that under-promise and over-deliverAvoid CEOs that do the inverse

Stop-loss orders should really be called Stop-Compounding Orders

"Do nothing" is almost always the right move.

I've been investing for 18+ years I've made TONS of mistakes along the way here are 10 critical investing lessons I wish I could teach my younger self:

Investing Verses Gambling

Investing Advice for Teenagers (2022)

How to Invest in your 20's? | Complete Guide

20 Habits you Should Know & Follow in Your 20’s

10 critical investing lessons I wish I could teach my younger self

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