Warren Buffett: "Performance comes, performance goes. Fees never falter."
Ronald van den Hoorn

Warren Buffett: "Performance comes, performance goes. Fees never falter."

10 years ago Mr. Buffett placed a 10-year bet. The bet contains an important lesson for all investors.

Mr. Buffett made the bet to publicize his conviction that a virtually cost-free investment in an unmanaged S&P 500 index fund – would, over time, deliver better results than those achieved by most investment professionals, however well-regarded and incentivized those “helpers” may be.

Now the bet is over and Mr. Buffett won the bet gloriously. The following is extracted from Mr. Buffett's letter to his shareholders: 

Addressing this question is of enormous importance. [American] investors pay staggering sums annually to advisors, often incurring several layers of consequential costs. In the aggregate, do these investors get their money’s worth? Indeed, again in the aggregate, do investors get anything for their outlays? Those performance incentives, it should be emphasized, were frosting on a huge and tasty cake: Even if the funds lost money for their investors during the decade, their managers could grow very rich. That would occur because fixed fees averaging a staggering 2 ½% of assets or so were paid every year by the fund-of-funds’ investors, with part of these fees going to the managers at the five funds-of-funds and the balance going to the 200-plus managers of the underlying hedge funds.

Indeed, Wall Street “helpers” earned staggering sums. While this group prospered, however, many of their investors experienced a lost decade.

Performance comes, performance goes. Fees never falter.

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