Don't try and take on Warren Buffett

Hedge Fund

Hedge funds ? Buffett spits 'em out.

There's just four years left in the 10-year bet between billionaire Warren Buffett and a New York hedge fund firm, and it seems clear that Buffett will win handily.

MarketWatch reports that more investment magic from one of the world's richest men?

Not at all. Buffett's side of the bet was one anybody could have taken: Buy the Standard & Poor’s 500 Index SPX,  starting in January 2008 through a very low-cost index fund and wait. The hedge fund could do whatever it wanted and presumably owns a collection of hedge funds.

The initial bet was $320,000 in bonds that would be worth $1m in a decade's time, with the gains going to charity. (Buffett put up his own money.)

As of early 2014, Morningstar reports, the hedge fund approach was up 12.5% after fees, while Buffett's index fund was up 43.8%.

A good part of the difference comes down to fees: Buffett bought an index fund that charges just 0.05% as an expense ratio, while hedge funds typically cost 2% and a whopping 20% of profits.

To access the complete MarketWatch article hit the link below:

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