You may have heard how Warren Buffet had won a 1 million by betting in an S&P 500 index fund against a portfolio of hand-picked hedge funds. If you haven’t, here is the summary in one line: Warren Buffett waged a bet that an S&P index fund could beat a hand picked portfolio of hedge funds over a period of ten years. He won the bet. The bet started on 1 Jan 2008 and ended on 31 Dec 2017. At the end of the ten-year bet, the S&P 500 index fund returned 125.8% while the hedge funds returned an average of 36.3%.

Keeping Costs Low is one crucial factor

In his 2016 BRK letter, Warren Buffett explained that the keeping costs low is the crucial factor for most average investors. The standard ‘2 and 20’ hedge funds fee is expensive. It means 2% annual fees, whether the fund is doing well or not, and 20% of profits will be paid to the fund managers with no clawback....