To buy, hold and rebalance a basket of low-cost index funds is the better path to investing.The Portfolio Solutions® investment philosophy is built around a single, important concept: that investing to capture stock and bond market returns at the lowest possible cost will give you the highest probability of meeting your long-term financial goals. This approach, often called “index investing,” keeps more of your money working for you by using low-cost investments, such as index funds.
Index investing works better than high-cost strategies, including stock picking and market timing predictions, which are often referred to as active strategies. Many academic studies conclude that these high-cost strategies typically under-perform index investing by a substantial margin. This is due to poor market timing, poor investment choices, and most importantly, excessive trading and high fees. The low-cost, tax-efficient practicality of index investing has generated returns that have beaten the average actively managed mutual fund in every asset class, every investment style, and in every country around the globe.
Nobel laureates in economics as well as many “investment greats” such as John “Jack” Bogle, Warren Buffett, Peter Lynch and David Swensen have been telling us for decades that index investing is a better strategy than market timing and stock picking. Virtually every unbiased study on the subject comes to the same conclusion: to buy, hold and rebalance a basket of low-cost index funds is the better path to investing.