Buffett Says Passive Investors “Must Win” Over Active Managers

In his recent letter to stockholders of Berkshire Hathaway, Warren Buffett explained why index or passive investing beats out active management.

According to Buffett, everyone naturally expects to be above average, and active managers encourage their clients (“bless their hearts,” he says) into believing it is possible when investing.

However, active management must deliver below average returns since they incur high transaction, management, and advisory costs.

This means, concludes Buffett, that passive investors “must win”.

Interestingly, Buffett was just named the wealthiest person in the world overtaking his friend, Bill Gates. Could there be a connection? Value investor who believes in asset class investing.