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Step 5: Follow the leader (the institutional investor) |
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.jpg) Another theme is that despite the differences between individuals and institutions, it is often advantageous for an individual investor, when circumstances permit, to act as if he were an institutional investor:
How?
- Seek out and find products in which institutional investors invest their own money and seek to invest, to the extent possible, on the same terms (i.e., same level of costs), and avoid products which involve excessive costs.
- Review the return on your investments using the same indexes as institutions.
- Rarely invest (there are exceptions generally involving tax matters) in products which institutions avoid.
- Use ETFs which invest in the market in general and typically offer better management expense ratios than actively managed or even indexed mutual funds. ETFs are products created by managers with their roots in the institutional world and which are purchased as much by institutions as by individuals.
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Last Updated ( Wednesday, 09 January 2008 )
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Quotation
On average, (during the 1990’s), the S&P500 index returned 1.45% more than the average active  equity fund. But after all the costs are deducted, the S&P500 Index fund returned 6.64% more than the average active equity fund. Mac Barnes |
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