Jay Vivian, former managing director of the IBM Retirement Funds, on the thought process that lead him to index investing. More index investing tips from retirement pros.


I’m a big believer in indexing, which is one of the reasons why I’m working with Rebalance. And a lot of times people say, “But why do you want to give up all the money that’s out there just waiting to be taken off the table, off the tree. The low-hanging fruit off the tree. Why do you want to give that up?”

And my thought process there is that it’s not low-hanging fruit. It’s really high up on the tree. It’s really hard to reach. It’s really hard to get to. And I kind of went through a thought process of what do you have to do in order to get to that fruit? And the answer is not as simple as you think.  It’s not just you have to have some smart guy that can figure out that Apple is going to go up to whatever it is today.

What you need to do is you need to be convinced that some managers will outperform. And some will. You need to be convinced that you can pick them, so not so easy. You need to be convinced that you can access them because sometimes the best ones are not open to the public. A lot of mutual funds close when they get too much assets.

You need to be able to afford them. Some of the better ones are expensive. And you can actually build a whole decision tree that says, “Here’s all the things that I have to be convinced of in order to be able to select and hire and access and pay for active managers.”

And in my view, even the richest, most intelligent investing pools of capital have trouble doing that. And if you’re a small, individual investor I think the chances of you being able to do it, of you being able to pick a manager or an advisors that can help you do that, are pretty small.

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