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Invest Like a Guru by Charlie Tian

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CHAPTER 8Passive Portfolios, Cash Level, and Performance

If you have made it to this point in the book, you probably realize that there is no secret to investing. Once in a while, I come across someone expressing the wish that Warren Buffett reveal his investing secrets to the public. Buffett has revealed all his investing secrets over and over throughout the last 60 years in his shareholder letters, interviews, speeches, and writing; they are there for everyone to grab—you just need to be willing to work hard and learn.

If, however, you are not interested in studying investing, or you don't have the time, you can still benefit from the growth of great businesses by simply investing in the S&P 500 index funds, a good mutual fund, or a basket of good companies. As I demonstrated in Chapter 3, S&P 500 companies do relatively better than all other U.S. businesses on average. A cautious and survival-bias-free study by Sungarden Investment Research found that over ten-year periods, the S&P 500 index beat 60 percent of actively managed mutual funds.1 Even Buffett said that if he died, his wife would invest in an index fund. About index investing, in his 1993 shareholder letter, Buffett wrote: “When ‘dumb’ money acknowledges its limitations, it ceases to be dumb.”2 S&P 500 index funds generally have low fees and low portfolio turnover. Low fees is also one of the key reasons the index funds outperformed, and low portfolio turnover makes index-fund investing more tax-efficient.

To achieve ...

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