Those who believe in the virtues of passive indexing will generally pooh-pooh the idea that one can beat the market. But the truth is, a small percentage of people do beat the market over the long term. Putting aside the statistical flukes (retail investors who get lucky), you can still observe a group of people who have managed to beat the market over a long period of time, with a very large amount of money. Besides Warren Buffett, several Ivy League endowment managers have consistently beat the market by a large margin, with billions of dollars at stake. Of course, this is made possible partly because many investing instruments are available to larger institutional investors that retail investors cannot access. But according to these managers, the trick for individual investors isn’t active trading: it’s better asset allocation. Here’s how you can build your own “Ivy League endowment fund” using ETFs. [click to continue…]
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