Mar 19, 2018

Warren Buffett's Hedge Fund Bet Results in Big Win

S&P 500 versus Hedge FundsDuring the mid-2000s I was a partner in a private trust company that was in the midst of reinventing itself.

S&P 500 versus Hedge Funds

During the mid-2000s I was a partner in a private trust company that was in the midst of reinventing itself. For years the firm had used a regional large cap investment firm to manage client portfolios, but at my urging the firm adopted a markets-based investment approach using investments from Dimensional Fund Advisors (DFA) in 2003. Our clientele and new business focus were mostly inheritors of wealth with portofolios of $5 million or more. This was during the "heydey" of hedge funds, and we encountered many a prospective client that scoffed at the DFA approach, insisting their investment needs required more sophistication, sophistication that only hedge funds provided. Despite academic evidence that most hedge funds were unlikely to outperform, the power of narrative, overconfidence and the allure of beating the market led many prospective clients to turn us away.

At the end of 2007 famed investor Warren Buffett made a much publicized 10 year bet with investor Ted Seides. The two bet $1 million (to the winner's charity of choice) - Seides wagering on five hedge fund of funds, and Buffett taking the pedestrian S&P 500 index. Their bet came to a close in December. Buffett's pick returned 8.5% annualized.............Seides hedge fund basket returned a mere 2.9%. Even more noteworthy, not one of the hedge fund of funds Seides selected managed to beat the S&P.

History is written by the victors. Unfortunately, time dulls the memory of folks. And recent research on neuroscience reveals our brains chemically change to deal with conflicting information, i.e. we often create a narrative to fit our circumstance. The day is coming when lots of "sophisticated" people will again fall for the siren song of a "sophisticated" investment, one that will almost certainly leave them worse off ten years hence. Don't believe me? Just ask Warren.

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Mike Palmer Quoted in MarketWatch: Your Financial Adviser Is Getting 1% - But Is That Fair to You?

Fee transparency and value received are the keys to finding an advisor truly focused on financial planning and not product sales.

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How a Trip to Enroll in Medicare Almost Cost Our Client $300,000 - And How to Choose the Right Social Security Claiming Strategy

Several weeks ago our client, “Joe,” walked into a Social Security office to enroll in Medicare. However, over the course of that appointment he was told by an employee, “it’s your money, you’d be silly not to start it.” That casual recommendation could’ve cost Joe roughly $300,000.

Mar 10, 2026

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How QTIP Trusts Protect Your Second Marriage and Your Kids

One-third of married Americans age 55 and older are currently in a second marriage. While remarriage is common in this age demographic, it often creates what we call the "Brady Bunch" dilemma: how do you ensure your current spouse is financially secure while also guaranteeing that your assets eventually reach your children from a previous marriage?

Mar 7, 2026

Mike Palmer Quoted in MarketWatch: Your Financial Adviser Is Getting 1% - But Is That Fair to You?

Fee transparency and value received are the keys to finding an advisor truly focused on financial planning and not product sales.

Mar 23, 2026

How a Trip to Enroll in Medicare Almost Cost Our Client $300,000 - And How to Choose the Right Social Security Claiming Strategy

Mar 10, 2026

How QTIP Trusts Protect Your Second Marriage and Your Kids

Mar 7, 2026

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Trump Accounts: The Ultimate Tax-Free Wealth Strategy for Kids

Trump Accounts can be an excellent jump start to a child or grandchild's retirement savings.

Mar 3, 2026

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