Even in a Down Stock Market the S&P 500 is Still the Best Bet

When competitor Money magazine ceased print publication in 2019, Kiplinger’s acquired roughly 400,000 of its monthly subscribers.

Kiplinger continues to offer investment advice in both a printed magazine and an on-line version. 

But what is the point of trying to outsmart the index low fee investments? 

When I started investing in the late 1980s every fund compared itself to the S&P 500.  Oh, I said to myself, those managed funds are trying to tell me that they have the formula to beat the index.  Why not just invest in the index?  Then I learned about a Vanguard fund that simply emulated the index.   

“Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17. If I had to pick the most probable return, from appreciation and dividends combined, that investors in aggregate—repeat, aggregate—would earn in a world of constant interest rates, 2% inflation, and those ever hurtful frictional costs, it would be 6%!”

— Buffett, Fortune (1999)

Warren Buffett has been a supporter of index funds for people who are either not interested in managing their own money or don’t have the time. Buffett is skeptical that active management can outperform the market in the long run, and has advised both individual and institutional investors to move their money to low-cost index funds that track broad, diversified stock market indices. Buffett said in one of his letters to shareholders that “when trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients.” In 2007, Buffett made a bet with numerous managers that a simple S&P 500 index fund will outperform hedge funds that charge exorbitant fees. By 2017, the index fund was outperforming every hedge fund that made the bet against Buffett.