Simplicity is the Ultimate Sophistication
“It’s taken me all my life to know which notes not to play.”
– Dizzy Gillespie
As I rapidly approach my 60th year I am increasingly convinced that, as in most things in life, simple is usually better than complex. And so it is with investing.
As a wealth advisor I am on the receiving end of the marketing skills of individuals and companies that have “interesting and exciting” financial products which they would very much like me to make available to my clients. At the risk of generalizing, in this category I would include hedge funds, private equity, and marketable alternatives (or liquid alts). Unfortunately, once you eliminate the “interesting and exciting” parts and take into account their complexity and high fees, you are more often than not left with sub-standard performance. Nowhere is this more true than in the area of endowment funds. Curiously, the larger the endowment fund, the greater the chance that its investment committee would tilt a higher percentage of its holdings towards these types of products.
In a well researched short post, Ben Carlson recently wrote about this simple vs. complex issue. I encourage you to click the link … you may be surprised by his conclusions.
A Wealth of Common Sense blog posting by Ben Carlson of Ritholtz Wealth Management “Simple vs. Complex, 2020 Edition”, posted August 3rd, 2021