The investment world recently lost John Bogle.  Many of you will look at me with wild eyes asking who on earth John Bogle was.  He was a man that pioneered cost-effective investment into unit trusts as they are known in South Africa or ETF’s as they are known elsewhere.  His company, Vanguard, became the number one ETF firm in America and sparked off imitation companies such as SATRIX in South Africa.  They basically do low cost investing in the Stock Exchange generally just mimicking the entire index.  In other words, if the market goes up as a whole, your shares go up as a whole and if the market goes down they go down. 

The biggest problem is that over the last 30 or 40 years, even longer, there are very few professionals, although they always say they can beat the market, who actually consistently beat the market.  With an index fund at a cost of 0,2% a year, a professional at a cost of about 2% a year, is a lot more expensive if they don’t beat the index fund (which they usually don’t).  In other words, “professional investment experts” charge almost 10 times more, even if 0,2% to 2% does not seem like very much more, and in return for that they often don’t even match the index and often do worse than it.  There will come a time when they will probably start doing better than the index – when that is, I don’t know, other than to say that every year they announce that this is the year for active investment compared to the passive investment of just buying an index, and so far, on the whole and for most of them,  they have not been right.  Warren Buffett also had a bet with a famous manager a few years ago where the investor pretty much guaranteed he could beat the index over a 5 or 10 year period and ultimately failed miserably in his bet with Warren Buffett.