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Warren Buffett bets against hedge funds

posted by Jason Kottke   Jun 10, 2008

Buffett to hedge fund managers: your customers would do better investing in a no-load index fund. To prove his point, Buffett has bet $1 million to that effect on Long Bets.

Costs skyrocket when large annual fees, large performance fees, and active trading costs are all added to the active investor’s equation. Funds of hedge funds accentuate this cost problem because their fees are superimposed on the large fees charged by the hedge funds in which the funds of funds are invested.

A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.

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Warren Buffett book recommendations

posted by Jason Kottke   Jun 05, 2008

Pay attention: ten books on investing recommended by Warren Buffett.

Ben Stein muses about taxes, but the

posted by Jason Kottke   Nov 28, 2006

Ben Stein muses about taxes, but the Warren Buffett stuff at the beginning of the article is the most interesting bit. “In conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires.”