Part 7/9:
The conversation surrounding active and passive investment strategies often descends into a competition for outperforming one another. However, this article posits that focusing on overall performance is more substantive than simply aiming to outperform. The focus should shift towards effective performance, which serves the investor’s goals and long-term financial wealth.
Warren Buffett’s cash allocation decisions exemplify this principle. Felix argues that a typical investor should remain fully invested in low-cost index funds; however, Buffett’s approach focuses on securing returns with reduced risk exposure. This sense of security allows him to allocate large cash reserves while ensuring he capitalizes on fixed income returns with less market volatility.