Photo credit: “Flaw in the Title,” engraving, Samuel Hollyer after William Holbrook Beard, 1871. Library of Congress
By Jason Zweig | Apr. 6, 2015 9 p.m. ET
My post last week about Benjamin Graham’s views on index funds turned out to be popular; as I showed, the father of modern security analysis and founder of the discipline of value investing said several times that index funds made good sense.
My post angered many professional investors, who seem to feel that because Graham devised the discipline of security analysis, he therefore believed that active stock-picking must be better than replicating the market’s returns with an index fund.
The evidence shows nothing of the kind.
From the brilliant speech Graham gave in November 1963, “Securities in an Insecure World,” here’s another example of the master’s thinking on the topic of active fund management:
You are entitled to your own opinions about what Graham should have believed about the topic, but you are not entitled to your own facts about what he did believe. It might make you uncomfortable that Graham was in favor of index funds, but your discomfort can’t change the historical evidence.