Yale University Investing Advice

David Swensen is an investing superstar.  He manages Yale University’s endowment which is valued at over $22 billion.  Over the past two decades, Yale’s endowment has grown an average of 16.8 percent a year, more than any university, foundation or pension fund.  Here is some of his advice for individual investors to D.I.Y. invest.

Paying for Advice :

“Paying up to 1.25 percent of the total investment. That means an investor with a half-million dollars invested in a retirement 401K would end up paying about $6,250 a year in fees.

Over 20 years, that person is losing hundreds of thousands of dollars because of fees. Of course, that’s better than not investing at all, and a lot of people want an adviser to help them.  Most of these investment services provide pretty mediocre advice, and it’s just not worth giving them a percentage of your life savings.

That’s the wrong path and the reason it’s the wrong path is it’s a very, very expensive path.”

What to Invest in:

“Fees are also the big reason you should buy index funds instead of classic mutual funds. Index funds, which track market segments like the S&P 500, are a lot cheaper. The vast majority of professional mutual fund managers fail to beat those indexes.

When you look at the results on an after-fee, after-tax basis over reasonably long periods of time, there’s almost no chance that you end up beating an index fund the odds are 100 to 1.

Don’t try to pick individual stocks, instead pick nonprofit funds like Vanguard”