This chart from an article in today’s Wall Street Journal shows the percentage of funds that underperformed the S&P 500 in the last 12 years. Again, passive indexes beat 85% of the active managers last year, and the majority have done so for 12 consecutive years. This is one of the reasons why we champion passive index funds.
I am reminded of this chart every time I drive by a car lot. Before the pandemic, financing and insurance profits made up 70% of the dealer’s profits. Now, due to price appreciation of their inventory, that percentage has changed. However, the dollar profits from financing and insurance continue to increase. Car dealers have become more like finance and insurance companies.
Since we use both Vanguard and iShares by BlackRock Exchange Traded Funds (ETFs) extensively, one of my pleasures over the last few years has been seeing each company try to outdo the other by lowering costs. As they continue to lower costs, they gather more and more investments. As referenced in a recent Bloomberg article, together they account for 64% of the ETF market as Vanguard is getting close to the size of BlackRock.
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