“Their money, they feel, should buy them something superior compared to what the masses receive.”
He continued, “The financial ‘elites’ — wealthy individuals, pension funds, college endowments and the like — have great trouble meekly signing up for a financial product or service
that is available as well to people investing only a few thousand dollars.”
Mr. Buffett said that wealthy individuals get drawn in by consultants selling them big promises.
That’s the figure that Warren E. Buffett recently calculated
that pension funds, endowments and wealthy individuals have lost over the last decade to hedge funds and other money managers that charge sky-high fees.
In his letter, Mr. Buffett offered an unusually cogent, honest and blunt appraisal of the human behavior
that drives individuals with money to avoid index funds — and their willingness to pay huge fees.
Large fees flow to these hyper-helpers, however, if they recommend small managerial shifts every year or so.”
That advice, Mr. Buffett added, “is often delivered in esoteric gibberish
that explains why fashionable investment ‘styles’ or current economic trends make the shift appropriate.”
Mr. Buffett’s index-loving advice may seem counterintuitive coming from a man who is considered the most successful investor in history —
and who became so by actively making individual bets in the market.
Perhaps Mr. Buffett’s advice is being taken: Last year, according to Morningstar, about $505 billion flooded into index funds
and exchange-traded funds; $340 billion was pulled from active money managers
