Back in 2006 Warren Buffet publicly challenged fund managers to a wager. He bet that over a ten year period the stock market would outperform any professionally managed investment fund.
Buffet wrote, “though there are thousands of professional investment managers who have amassed staggering fortunes by touting their stock-selecting prowess, only one man — Ted Seides — stepped up to my challenge,”
Buffet put up $500,000 and Ted Seides’s fund put up $500,000 resulting in a $1 million bet. Buffet picked a Vanguard index fund that tracked the S&P 500. Ted Seides’s picked a fund of funds that comprised of five hedge funds. The ten year period came to an end in 2016.
The Vanguard index fund handily beat the fund of funds. According to Buffet, “$1 million invested in those funds would have gained $220,000,” he said. “The index fund would meanwhile have gained $854,000.”
I was curious how Buffet’s own performance stacked up against the S&P 500.
It turns out that Buffet is one of the few people to have beaten the S&P 500 for over 35 years. $10,000 invested with Buffet in 1965 would have grown to $88 million dollar today. That same amount invested in the S&P 500 would have grown to $1.3 million.
And yet, every year billions of dollars go into funds managed by investment managers.
The point of this story?
People will ignore simple advice and go with shiny, complicated tactics. I see it in e-commerce. Heck, I fall into the same trap myself.
But the reality is that simplicity always wins. And it wins big in e-commerce loyalty. Online customers want a simple way to earn and use rewards.
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