'Over the past decade, about 80 cents of every dollar that has gone into the US investment industry has ended up at Vanguard, State Street, and BlackRock. As a result, the combined stake in S&P 500 companies held by the Big Three has quadrupled, from about 5 percent in 1998 to north of 20 percent today.'
'Over the past decade, about 80 cents of every dollar that has gone into the US investment industry has ended up at Vanguard, State Street, and BlackRock. As a result, the combined stake in S&P 500 companies held by the Big Three has quadrupled, from about 5 percent in 1998 to north of 20 percent today.'
Those lines are from a new book Trillions: Why Passive Investing Beats Active, written by our guest today, Robin Wigglesworth, Editor of FT Alphaville and bestselling author. In this conversation, Robin explains the forces that drove the creation of the passive investing industry, the key architects and the roles they played, how he shows that passive beats active in developed markets over time, but the controversy and dangers emerging from this financial tsunami and where we might be going.
Robin brings to life the determination of men like Jack Bogle (Vanguard) who championed passive investing ('The math will never let you down'), to Paul Samuelson, William Sharpe and Warren Buffet, who has long argued the merits of passive investing in the S&P 500. Robin concludes that 'the exact statistics vary between countries and types of market that they invest in, but roughly speaking, only 10 to 20 percent of active funds beat their benchmarks over any rolling ten-year period. In other words, investing is a rare walk in life where it generally pays to be lazy and choose a cheap passive fund.'
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