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TylerJay comments on Brainstorming for post topics - Less Wrong
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A while back, I read "The Little Book of Common Sense Investing" by John Bogle, the founder of Vanguard and creator the first index fund. It's an analysis of why index funds are a better option than actively managed mutual funds.
I've had some highly-upvoted comments on the merits of index funds on the past, so I've considered doing a writeup on it to give LessWrong a summary since it seems that a lot of people around here know that they're supposed to be good, but don't really understand all the reasons why. Is there any interest around this?
Edit: Thanks for the positive response. I'll work on it and try to get it out in the next couple weeks. Does anyone have any input on whether it would be appropriate to post in Main?
I would like to read it, as long as there will be more than just the basic idea of "you can't be reliably better than the market, and the index funds copy the market".
For example, there are many index funds. I know they are supposed to be better than all other options, but how do I compare them against each other? Or, how much of the historical success of index funds is a survivor bias, that USA was simply not destroyed in a war, while many other countries were? (If you had invested your money in 1900 in Russian or German index funds, how much would you have today? Let's suppose you would put 1/3 in Russian, 1/3 in German, 1/3 in American index funds, how much would you have today? Is the advice for your readers to pick a random country, to always pick USA because that worked in the past, or to diversify internationally?)
I would think that the reasons are fairly well known, what kind of reasons do you think the average person on LW misses?
I can think of a couple of tidbits, e.g. most small random samples of the S&P 500 will underperform the S&P 500 itself because of <math>.
In addition to my upvote, this comment is confirmation I, for one, would be interested in this.