The World’s Greatest Investors

by | Aug 20, 2019

When you ask people who the greatest investors in the world are, you get a few familiar answers. At the top of their list is the venerable Warrant Buffett of Berkshire Hathaway, the “Oracle of Omaha; everyone’s favorite investment grandfather. Going back further in time, some familiar investment heroes were Benjamin Graham, the author of “The Intelligent Investor” and Bernard Baruch, who is famously quoted as saying “ no one ever went broke taking a profit”.

While these investment giants of the past and present deserve all of their accolades, there are others who might one day be recognized as the world’s greatest investors.

So who are these great investors? Are they quantitative math wizards working at hedge funds? Are they software developers that will unlock the keys to the investment universe with new technology? Are they renegade traders that will run up the score on their competition using gut-intuition and fearless risk-taking? The world’s greatest investors today are none of these.  

It is possible that the world’s greatest investors today are not one or a handful of wealthy and prestigious financial elites. They are the millions of otherwise ordinary folks who faithfully and consistently invest in their 401k, 403b or similar defined contribution plans each time they receive their pay. You may well be one of them.

Unlike the frazzled and often bumbling amateur and professional traders who watch and trade the markets moment to moment each day (myself included), the 401k/403b investors proceed with their daily lives, working their jobs, raising their families and focusing their attention onto the more relevant and real aspects of living without obsessing upon every financial news headline and crazed market overreaction.

With a measure of benign neglect, the 401k/403b investor engages markets with an automatic buy, add and keep strategy that over a period of years can outperform even the most sophisticated hedge funds and institutional investors.

Asset selection in most 401k/403bs are limited to a finite menu of mutual fund and/or index ETF based investments, most of which are reasonable selections that should conform to the 1974 ERISA act. Plan participants may get asset selection help from investment professionals or HR personnel at their workplace, or simply make the selections themselves. Investment results very substantially based on selected assets, how long they are invested and how they are allocated, but the specific rates of return for any one investor is less important than the philosophical foundation of the buy, add and keep mentality that has proven so successful for many 401k/403b participants in recent years.

Today, we have what seems like an infinite universe of data on all manner investment performance, but only some of it can be useful in determining whether the buy-add-keep strategy of 401k and 403b investors can really outperform more active and nimble strategies that more sophisticated investors utilize to achieve a positive “alpha”, a fancy way of describing investment performance better than the S&P 500 or other benchmark.

Most 401k/403b investors have no idea of the chase for “alpha” or any of the other often madcap antics of asset managers trying to make money in markets and thereby justifying their existence, they just go on with their lives, and ignore, for the most part, the daily machinations and absurdity of financial markets, and often unknowingly become some of the world’s greatest investors.

Share This