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Rola Khaleda, FT editor, chooses her favorite stories in this weekly newsletter.

The author is the author of the book “ Random walk in Wall Street

Results in: this time is not different. Indexing is still the optimal investment strategy.

The S& P Global Contings publishes reports that compare all investment funds that are actively managed with various stock indicators. These reports are the golden standard for evaluating the performance of the active fund management through the index alternatives.

The bottom line from the end of the year 2024 a report Outside this month, there was no surprises. In 2024, negative index funds outperformed two -thirds of the money managed. This is consistent with the previous results, which also shows that a third of managers who excel over any one year are not generally like those who win the next comparison.

When you collect the results for 20 years, about 90 percent of the active boxes produce lower returns to low -cost index boxes and boxes circulating on the indexed stock exchange. Long -term results have been recorded for the long -term money that focuses on advanced economies, emerging markets and bonds. Even for small funds, which have been in 2024 good, only 11 percent excelled over the past two decades.

It is not impossible to overcome the market, but if you try, it is more likely that 90 percent of active managers will achieve. Evidence becomes stronger every year: the investment of the index fund is an ideal strategy for the ordinary investor.

Despite the evidence, many active managers argue that the future will be different. One of the common opinion is that the popularity of negative investment has created an unhealthy concentration of stocks in popular indicators and made an increasingly framed strategic index. It is a second argument that some active managers have defended is that the index investors pour money in the market without regard to the company’s profits and growth opportunities. This harms the market ability to reflect the basic information, creates its pricing, and thus allows active managers to use their skills for future excellence.

It is definitely correct that the market is very concentrated. A few technology shares (known as The Magnificent 7) had a third weight in the S&P 500 index and was responsible in 2024 for more than half of the total market return of 25 percent. But this focus is not unusual.

In the early nineteenth century, bank shares are about three quarters of the total market value of shares. Railways shares formed a lot of the total market value in the early twentieth century, and the fake of the Internet related to the index in the late twentieth century. It is not customary for a small percentage of shares responsible for most market gains. A Ticket By Hendrick Bessbybinder I found that only 4 percent of American stocks traded in the United States may represent all excess revenues in the US Securities Market almost on Treasury bills since 1926. The concentrated market is not a reason to abandon the index index. All shares in the market will ensure that the few shares responsible for most of the market gains have.

The second argument “this time is different” is against the indexing that the index boxes have grown very quickly that they interfered with the market’s ability to pricing stocks almost properly and accurately reflects new information. Some have suggested that the growth of negative indexing has been born in stock market bubbles such as the current boom in the prosecution -related shares. More investment without considering basic information will enable active managers more easily to overcome the index in the future.

There are logical and experimental reasons for rejecting these claims. Even if 99 percent of investors bought indicators, the number of 1 percent will be more than enough to ensure the reflection of new information in stock prices.

If one believes that bubbles will enable active managers to outperform performance, then think about the internet -stock boom data that has expanded until 2000. Many of the Internet -related shares are sold in three -numbers profits complications, much higher than the current assessments of artificial intelligence stocks today. SPIVA data shows that during 2001, 2002, 2003, 65, 68 and 75 percent of active managers, the market performance was in each of these years “in the afternoon”.

Evidence grows more convincing over time. The essence of each investment portfolio must be indexed and diversified across asset categories. Indexing will definitely lead to low fees and low transaction costs, which are effective in taxes. Indexing boxes are also boring, and this may be one of its greatest advantages, and it is less likely to be optimistic or pessimism that distinguishes financial news. As a white rabbit in the movie Is it not in the country of wonders? He advises us, “Just do nothing, stand there.”