Lesson 2 of 4 · 4 min read
Index investing
Why 'buying the market' is often the smartest choice.
Beating the market is hard
Over 15 years, ~90% of active funds do NOT beat the index. So simply tracking the index usually wins.
Buffett wins $1M bet: index beats hedge funds
Warren Buffett bet that a simple S&P 500 index fund would beat a basket of expensive hedge funds over 10 years. He won decisively — the index returned ~7.1% per year, the funds ~2.2%.
S&P 500, MSCI World
The S&P 500 = the 500 largest US companies. MSCI World = ~1,500 companies from developed countries. Broad baskets, low costs.
Boring is beautiful
Automatically putting money into a world index every month and doing nothing beats most 'active' investors over the long term.
Remember this
- Over 15 years, ~90% of active funds do NOT beat the index.
- S&P 500 = the 500 largest US companies; MSCI World = ~1,500 from developed countries.
- Simply tracking the index usually wins — at much lower costs.
- Boring and consistent (monthly contributions, doing nothing) beats busy trading.
There is a quiz for this lesson
2 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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