Fund trustees have a fiduciary responsibility to act in the best interests of those they invest on behalf of. But Warren Buffett, the world's most famous investor, says they're failing in that duty by not using low-cost index funds. So why don't trustees follow Buffett's advice?
Warren Buffett is generally accepted as the world's most successful living investor. His company Berkshire Hathaway, of which he is still the chairman and CEO at the age of 93, produced market-beating investment returns for decades. Buffett's net worth is estimated to be around $115 billion, and he has already donated more than $50 billion to charitable causes. Thankfully, Buffet has willingly shared with investors the lessons he has learned over the course of his career, mainly through his famous annual letters to Berkshire Hathaway shareholders. The advice he has given has been consistently unequivocal. In a nutshell, Buffett says, investors should:
Keep things simple
Focus on the long term;
Stay humble;
Keep calm in volatile markets; and
Avoid active investing.
People are often surprised by that final tip. After all, Buffett made his name through active investing.
As Murray Coleman recently explained, there are reasons to explain Berkshire Hathaway's historical outperformance. Suffice to say, the company has failed to beat the broader stock market since the global financial crisis, and, in his most recent letter, Buffett warned that Berkshire has virtually "no possibility of eye-popping performance" in the years ahead.
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