hey guys welcome back to the channel i'm rich gilbert and i'm passionate about helping people
achieve success in their lives through goal setting and achieving those goals and through
great financial hygiene and investments and today i'd like to talk about what wharton taught me
about investing so for those of you who don't know what wharton is i didn't years ago it's it's one
of the best business schools in the world and they offer undergraduate and mba education i got my mba
there a number of years ago and it is fantastic it's filled with some of the smartest people
that i've ever met and amazing professors amazing faculty and campus it's truly a wonderful place
warren focus is very heavily on finance it's the feeder school to wall street before 2008 but also
for consulting and financial advisors and so on so you learn a lot about finances there and one of
the most striking things that i learned was in the first week or day or very early on in my wharton
career and i'll just set the scene a little bit i went into finance 101 so this is the the first you
know class of finance everybody has to take and a very famous professor and a huge lecture hall and
everybody there that goes to wharton they are all ivy league graduates are very prestigious schools
they want to be hedge fund managers or stock pickers or consultants or bankers or
or you know big big ticket kind of uh careers and uh very financial heavy so we all you know we're
all in this finance 101 and the professor gets up and he says something that that i'll never forget
and he says you cannot beat the market and he went on to say that well over 90 percent of
professional money managers don't beat the market they don't beat the s p 500 or the overall stock
market and the room was silent because all these people that are there are thinking that they're
able to pick stocks that are able to to pick the trends and be able to beat the market that's what
hedge fund managers get paid for they get paid a lot of money millions tens of millions of dollars
a year to pick uh investments that are going to beat the market and the and the professor was
up there and says you are not going to beat the market take a no load or low load mutual fund
that matches to the s p 500 or some large index invest your money in there and forget about it
keep buying into the market good times and bad and you will have that compounded
interest that's so magical and over time you will do the best that you possibly can
for your investments his key takeaway was if these professional money managers cannot beat the market
you cannot either and this was to a room filled with some of the smartest people on the planet
and he's telling them they can't beat the market so for us as normal investors let's take this as
a word of advice we cannot beat the market it is on the long term you will end up losing you
probably know who warren buffett is he's one of the most successful investors who's ever
lived he's amazing he is the chairman and ceo of berkshire hathaway which has an amazing stock
portfolio that makes all of their investors very very wealthy warren buffett is a value investor
he looks at companies very deeply he has teams of people that analyze the management team of the
companies he's investing in the market outlook for the industries that they're in and the potential
for growth and he has become very successful doing that in 2008 warren buffett made a million dollar
bet with the hedge fund industry he said he will put a million dollars into the s p 500
no load or low load mutual fund and he will bet that the hedge fund manager
cannot beat that over 10 years so one company took them up on that and they bet this is one of the
biggest hedge funds one of the most prestigious at the time and they bet a million dollars that
they could beat him well 2008 if you might recall was one of the worst years in stock market history
they started the bet on january 1st 2008 by march bear stearns had collapsed and by september
the entire market had just been decimated warren buffett in his s p 500 lost 37 percent
of his entire portfolio on that year and the hedge fund because they hedged they do
alternative investments they only lost 23.9 during that year but every single year after that the s
p 500 beat their best of the best stock pickers from the hedge fund and even all their alternative
investments everything it beat them and not just a little he beat them by a lot so in 2015 the
bet actually ended two years earlier because the hedge fund quit the hedge fund declared
failure and and victory for warren buffett they had made a year-over-year return of 2.2 percent
and their total return from the million dollars was about 220 000
but warren buffett on the other hand had amassed 7.1 percent on average it's a huge difference
and his total return was over eight hundred and fifty thousand dollars so it wasn't even
close the s p 500 the portfolio that matched to market beat the professional stock pickers soundly
over a 10-year period so if you're looking to build wealth stocks are a long-term gain
invest in the market invest in an overall portfolio that matches to market
and leave it there when you have more money every single month you need to invest more money
buy into the market when the market goes down stay in and just keep buying in buy through the dip
buy through the rise and you will be better than so many other strategies that you're doing it's
that simple and it's that boring you can be a boring investor and build wealth this way which
is good news you don't have to be watching your stock portfolio every day just put it in set it
and forget it and over time over the 10-year 20-year period 30-year period you will amass
much more much more money and wealth than you would if you're actively trading these stocks lots
of individual investors feel great when the stock market's going up and their portfolio is gaining
in value and they they feel like they're a whiz kid and doing great the problem happens when the
stock market starts going down often individual investors will pull their portfolio from the
market and that can be a major mistake because if you miss the top trading days of a 30-year run it
can have terrible consequences on your net worth so let's just look at the past 20 years from 2000
if you had had your money in the s p 500 in a no load mutual fund and just put it in and let it go
over that time you would have had a year-over-year compounded investment return of 6.06
okay that's a good return compound and interest is wonderful we can talk about it in another video
however if you pulled your money out and you missed just the 10 best trading days
of that 20-year period your return would have dropped to just over two and a half
percent so from six percent to two and a half percent just by missing the top 10 trading days
and if you missed the top 20 trading days during that time your investment would have basically
returned zero zero percent okay you're better off putting your money in a bank at that point if you
have money that you'd like to play with that you can lose great go play on stocks but know
that it's very likely that you will not beat the market overall so i talk a lot about mutual funds
and low-cost or low-load mutual funds and that's basically a mutual fund that has a basket of
weighted stocks that can either mark to market or to some other sort of strategy
and the portfolio that warren buffett put it in was the vanguard s p 500 admiral shares
fund and you can find that in vanguard.com this is not a sponsored video at all it's just i use
it personally and i'm a big big advocate for vanguard i think they've done a fantastic job
to democratize investing for the rest of us be boring put your money into mutual funds
and let it grow buy the dip use some play money for some other stocks and things that you have if
you want to take a risk no problem everybody has different goals and what they want to accomplish
here so great having you along it was uh fun to talk and reminisce about my old wharton days
and i hope this video helps if it did please like down below and consider subscribing because i'm
going to be pumping out videos like this on a regular basis and i would love for you to be
along for the ride and i hope it's helpful for you so i hope you have a great day take care