My Blog
Welcome to Dan MahONEY on Investing's Blog
Hi, I’m glad you’re here! I created this blog because I discovered the best way to invest for just about everyone. If you apply it, you will be an investing success, saving or earning thousands or even millions more than you otherwise would have. I got the idea from arguably the greatest investor of all time, Warren Buffett. I call it the Buffett Plan.
About Dan MahONEY on Investing
Dan MahONEY on Investing was created because I believe the best investment advice for most people comes from Warren Buffett. He recommends investing in the S&P 500 Index as early as possible, consistently adding to it, and holding it for a lifetime—one investment decision for your entire life. This website explains why this strategy works, what the S&P 500 Index is, and how it allows you to outperform the vast majority of professional money managers.
One Decision to make for your investment lifetime
How the Buffett Plan Came to Life
My path to the Holy Grail of Investing occurred while listening to the 2018 Berkshire Hathaway annual meeting, where Warren Buffett shared a story about buying his first stock at age 11 during World War II. He explained that if someone had invested $10,000 in an S&P 500 Index Fund back then, that investment would have grown to an incredible $52 million by 2018. He said the best thing he or anyone could have done at that time was to purchase an S&P 500 Index Fund. He called it the only investment decision you needed to make for your lifetime.
I thought to myself, could investing really be that simple? I asked why Mr. Buffett came to this conclusion and what facts supported his recommendation.
After doing an extensive deep dive into this thesis, my conclusion was that he is correct—the facts back up his conclusion. In fact, this is probably the only thing you could invest in for your entire lifetime and be guaranteed to succeed. This is the Holy Grail of Investing: it’s low cost, high performing, easy to implement, and requires little work or attention. You don't need a financial advisor to implement this strategy.
Shortly after my research, I told my wife, “Hey, I believe I discovered the Holy Grail of Investing, and it’s an S&P Index Fund.” Now, my wife graduated with high honors from Penn State with a degree in Business—admittedly, this was many years ago. She said, “What is an S&P Index Fund?”
It hit me: most people don't even know what an S&P Index Fund is, who Warren Buffett is, let alone why it's the Holy Grail of Investing. In fact, the investing landscape today is a nightmare of complexity and fraudsters.
That is why I created this blog—to explain what the S&P Index Fund is and why this is the best way to invest for the very long term.
Learn Directly from Buffett
Watch Buffett’s Advice on Investing – 2018 Berkshire Hathaway Annual Meeting:
Must-Read Summary of Buffett’s Investing Plan:
https://danmahoneyoninvesting.com/f/the-warren-buffett-investing-plan?blogcategory=Warren+Buffett
Condensed Versions of Buffett’s Advice:
1. https://youtu.be/Sti43Mra6QQ?si=--XyzwGnScvsxxB
2. https://youtu.be/2Ze0U5qF1To?si=jAeZqcrwmrnmMgTP
Additional Supporting Research
Wolf of Wall Street - Fugazi Scene
https://danmahoneyoninvesting.com/f/wolf-of-wall-street---fugazi-scene-that-is-true?blogcategory=Wolf+of+Wall+Street+Fugazi
I used to think this was just a joke, a gross exaggeration, but being in sales for 30 plus years and now looking at the financial industry as an outsider, this industry is on another level.
Want Proof?
S&P 500 Up 25%, Destroys the Princeton Endowment return of 3.9%
If you had the S&P 500 Fund like I recommend, you destroyed the Princeton Endowment last year—25% to 3.9%.
Like its Ivy peers, Princeton has a heavy allocation to high-fee private equity—both venture capital and traditional private equity—at nearly 40%. Another 23% is in “independent return,” a category that includes hedge funds.
Breaking It Down
- 60% of Princeton’s $33.4 billion endowment is allocated to alternative investments, which typically charge 2% of assets annually.
Total fees: $400.8 million per year.
- Princeton's endowment trailed the S&P 500 by 21% last year.
21% of Princeton's $33.4 billion endowment: $7.014 billion in missed gains.
See What I Mean by Being on Another Level?
That’s a staggering $400 million in fees and $7 billion in missed gains—or a total loss of $7.5 billion in fees and foregone returns.
The financial industry, especially in the world of alternative investments, is on another level. Despite charging enormous fees, even prestigious endowments like Princeton's can underperform a simple, low-cost S&P 500 index fund.
Charlie Munger, Vice Chair of Berkshire Hathaway and Warren Buffett’s long-time partner, is known for his blunt honesty. In this clip, he reveals the harsh realities of the money management industry today.
"The indexes have caused absolute agony among investment professionals, 95 % of people have no chance of beating it over time. People who have some money expect they can hire someone who can help them beat the indexes. The honest sensible people know they are selling something they can’t deliver. That has to be absolute agony. Most people handle this with denial. They think it will be better next year; they don’t want to think about it. I understand that I don’t want to think about my own death either. It’s a terrible problem. It’s a huge problem. Causes a lot of worry and fretfulness and the people who are worried and fretful are absolutely right."
https://youtu.be/6vlqrfRn7Bg?si=bz61i7XX5XBUFPLx
SPIVA S&P Active vs Passive and the Case for Indexing
The Standard and Poor’s Index vs Active (SPIVA) report highlights that 94 to 95 percent of large, midcap, and small-cap managers underperform after 20 years.
Challenges in Active Management
Several factors contribute to the difficulty of active management:
1. Professionalization
2. Cost
3. Return Skewness: Over a 20-year period, only 18 percent of stocks managed to outperform the index. The median stock over 20 years was up 89%, the index was up 517%. This is why it is so hard to pick stocks and outperform over the long term.
Here is a link to the presentation
https://danmahoneyoninvesting.com/f/spiva-and-the-case-for-indexing
2023 S&P Active vs Passive SPIVA 20 Year Study
Given this data, allocating capital into domestic equity funds through indexing should prove to be a superior strategy.
https://danmahoneyoninvesting.com/f/2023-sp-spiva-20-year-results-what-do-the-say
Ed Thorp: The Mathematician Who Conquered Casinos and Markets
In a captivating interview on the Tim Ferris Podcast, Ed Thorp, a renowned mathematician, and legendary investor, shares a lifetime of investing wisdom distilled into a few powerful lessons.
This blog post explores Thorp's advocacy for the Buffett Plan—buying and holding the 500 Index Fund—a strategy rooted in simplicity and historical performance.
https://youtu.be/CNvz91Jyzbg?si=UlFuGDq9tNVu6LkW&t=1415
I have included a written summary of the discussion at the link below.
https://danmahoneyoninvesting.com/f/ed-thorp-on-how-to-invest
The Investment Insights of Charles Ellis: A Financial Legend for 60 Years
In a recent interview with Consuelo Mack on WEALTHTRACK, Ellis shared his perspectives on the major changes in the market and their implications for investors. From the days when beating the market was feasible to the current era where indexing and long-term strategies reign supreme, Ellis’s journey offers invaluable lessons for both novice and seasoned investors.
Join us as we explore the wisdom of Charles Ellis and uncover the strategies that have stood the test of time in an ever-evolving financial landscape.
https://youtu.be/9ioXdUQr-4I?si=Xg
You can go here to get my complete notes on this episode.
https://danmahoneyoninvesting.com/f/charlie-ellis---how-to-invest-winning-the-losers-game
Ellis: Index Revolution
Introduction: In a compelling interview on WealthTrack, Consuelo Mack speaks with Charles Ellis, a leading consultant to investment firms, about the accelerating shift towards indexing and why it is the best choice for most individual investors.
"You can't have a service where 100 percent of the value added charge goes to the producer. "
https://youtu.be/fUpoK2ZOFWc?si=L8AMDFDwnl7ZJ5SN
Please go here to get a summary of the discussion
Paul Samuelson, the first American to win the Nobel Memorial Prize in Economic Sciences, in the 1970 article, The Professor, the Student, and the Index Fund by John C. Bogle, Bogle quoted Samuelson’s praise of the index fund,
"I rank this Bogle invention along with the invention of the wheel, the Alphabet, Gutenberg printing, and wine and cheese: a mutual fund that never made Bogle rich but elevated the long-term returns of the mutual-fund owners.
Definition of the S&P 500 Index Fund
Investing in this fund means owning a piece of American business.
Key Attributes of the S&P 500 Index Fund
- Tax-Efficient and Low Cost
- Managed
- Broad-Based and Diversified
- International Exposure
- Outperforms
- Dynamic: The stock market is dynamic, the S&P 500 algorithm captures the market, therefore an S&P Index Fund is Dynamic. For a visual representation of how the top companies in the market change over time, watch this clip from the American Business Institute: https://youtu.be/SLtUaIK3ssU?si=pnopgYF4G_WlqrpW.
Visit the link below for a more detailed explanation on what the S&P Index Fund is and why it is the "Greatest Investment Hack in History" according to Jordan Belfort, Wolf of Wall Street.
https://danmahoneyoninvesting.com/f/basic-information-you-need-to-know
How To Invest and Beat the Pros: Insights from Dr. Burton Malkiel
Excellent interview
Key points below and a written summary of the interview can be found at this link
https://danmahoneyoninvesting.com/f/how-to-invest-and-beat-the-pros-dr-burton-malkiel
The Genesis of "A Random Walk Down Wall Street"
You Can Do It Yourself
Understanding the Efficient Market Hypothesis
The Reality of Market Bubbles
The Facts About Active Management
The Power of Indexing
Conclusion
Why the Index Fund was Created - A Revolution in Investing
Read about how articles written by Paul Samuelson and Charlie Ellis inspired Jack Bogle to create the first index fund and why he was confident it would cause a revolution in investing.
Jack Bogel
“Nobel Laureate economist Paul Samuelson played a major role in precipitating the index fund 's creation. His lead article, "Challenge to Judgment," Bogle said Samuelson, “laid down an express challenge for somebody, somewhere to start an index fund.”
Paul Samuelson
“The title that I gave is Challenge to Judgment. That is a challenge to the notion that discretionary security analysis and portfolio decision making does accomplish something.”
“But a respect for evidence compels me to incline towards the hypothesis. Now it's only a hypothesis, that most portfolio decision makers should go out of business. They should take up plumbing, teach Greek, or just be ordinary corporate executives.”
From the, "The Loser's Game," by Charlie Ellis.
“Investment managers are not beating the market: The market is beating them.”
Bonus, you can listen to a rare interview with Paul Samuelson where he discusses his famous article, "Challenge to Judgment."
https://danmahoneyoninvesting.com/f/jack-bogles-inspiration-to-start-the-first-index-fund
The Impact of Fees on Long-Term Investment Returns - An example where 1 million invested for 30 years in the Vanguard S&P 500, vs an Advisor Active Mutual Fund Solution, where the returns are the same pre fees. The S&P earns 110 Percent More in percentage terms and $10.4 million more in real dollars terms.
https://danmahoneyoninvesting.com/f/1-million-invested-in-an-advisor-active-solution-vs-the-sp
Buffett's Million-Dollar Bet: How the S&P 500 Triumphed Over Hedge Funds
The Illusion of Persistence in Mutual Fund Performance
S&P U.S. Persistence Scorecard
The data suggests that choosing funds based on past performance is likely a misguided strategy. -
Outperformance by active managers is typically short-lived.
https://danmahoneyoninvesting.com/f/mutual-fund-persistance-is-fleeting
S&P Returns what history tells us – The S&P had returned 10 percent per year over 30 years, but it can and will go down, sometimes by a lot.
https://danmahoneyoninvesting.com/f/sp-returns-what-history-tells-us
Buffett and Bogle on how to handle market volatility.
https://danmahoneyoninvesting.com/f/buffett-bogle-stay-the-course
I hope by now it’s clear, you don’t have to build your own stock portfolio; you don’t need to subscribe to a service to pick stocks and you don’t need an advisor to pick stock investments.
The rest of the blog has additional information on investing. One thought I have is to come up with a course to teach the concepts outlined here. Let me know if you think this is something that you would be interested in.
Simplifying how to invest
The Quest
The Quest for the best way to invest