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Is passive investing really your best bet?

The benefits of passive investing are well-supported by data. The Credit Suisse Hedge Fund Index has delivered a compounded annual return of 7.18% since January 1994. By comparison, the S&P 500 has delivered a compounded annual growth rate of 10.25% over the same period.

Put simply, the passive index fund strategy outperformed the average hedge fund by 3.07% over decades. This is the basis for every passive investment strategy.

However, investors must realize that the Credit Suisse Index tracks the aggregate performance of over 9,000 different funds. The best performers in this group would have their numbers offset by the worse performers. In other words, the winners probably have a smaller gap with the S&P 500 or may have outperformed the index for extended periods.

Hedge fund investor David Einhorn is a good example. His Greenlight Capital fund had an extended period of outperformance for 20 years and he claims to have shifted his investment strategy to focus on companies that return cash flow in 15% to 20% range to keep beating the market. His exceptional performance wouldn’t be visible in an index that measures the average return of the whole hedge fund industry.

Don't forget the fees

Another factor to consider is fees and expenses. The Credit Suisse Hedge Fund index tracks performance after accounting for fees and management expenses on all 9,000 funds. Considering the fact that the typical hedge fund charges 2% in management fees and 20% performance fees, this explains much of the difference between an average hedge fund and the index.

The Moby team recognized that if you could avoid fees and focus on top performers, your chances of spotting market-beating stocks increase. That’s why they hired hedge fund analysts directly based on their track record and packaged their investment ideas in a newsletter platform that costs just $179.

The results of this experiment speak for themselves. In four years, across almost 400 stock picks, Moby's recommendations have beaten the S&P 500 by almost 12%, on average, according to independent analysis.

Generational bets

Over 5 million Moby Premium members receive 3 stock picks every week. The average Premium recommendation has delivered returns over 250%.

Some of these picks have outperformed the index by a wide margin. For instance, Alcoa (AA) delivered a total return of 1,080% and Asana (ASAN) returned 559% since they were recommended.

Even one massively overperforming stock can propel your portfolio to beat the market. One multibagger is enough to significantly boost your internal rate of return and put you on track to generational wealth. Investing just $1,000 in Nvidia stock in May 2014, for instance, would have expanded your wealth to $236,000 by now.

As Warren Buffett once said: “We only swing at pitches we like.” With Moby, you can receive 3 pitches every week which gives you plenty of opportunities to take a firm swing on your favorite picks.

By taking swings at individual stocks in a market dominated by passive investing, you’re adopting a contrarian approach — and with the help of the experts at Moby, that against-the-grain strategy could deliver better performance than the market average.

Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.


The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.