Bethesda, MD –JULY 1, 2020 – A decade ago Warren Buffett made a now-infamous million-dollar bet with successful hedge fund titan Ted Seides, wagering that the returns from an unmanaged S&P 500 index fund would surpass the 10-year performance of an actively-managed hedge fund.

Today, Rebalance’s Managing Director Mitchell Tuchman is taking a walk in Buffett’s shoes.  Tuchman issued his own challenge to members of the Los Angeles Chapter of the American Association of Individual Investors (AAII), to determine once and for all which investment strategy will come out on top:  Wall Street style “active” investing or passive index investing.

Jeff Heller took up Tuchman’s challenge, and the two contenders will be locked in a 10-year long battle to determine once and for all whether active investing or index investing provides the best return on investment.

Starting July 1, 2020, both contenders will open up brokerage accounts with Charles Schwab, where they will each deposit $20,000 as seed investment capital.  Tuchman will invest 100% of his funds in the Rebalance Growth Portfolio, a collection of index funds designed to generate long-term growth.  Heller will invest his funds as he sees fit.

The winner of the bet will select a charity to receive a $10,000 donation consisting of $5,000 each from Tuchman and Heller.   If Tuchman wins, the $10,000 will go to the Pitt Hopkins Research Foundation.  If Heller wins, the $10,000 will go to Harmony Project.  During the course of the 10-year bet, the $10,000 will be held in an account with Long Bets.  Long Bets, a project of the Long Now foundation, is an independent, non-profit, third party will that holds parties accountable to long-term bets.

“I’ve learned over the years, both personally and professionally, that the secret sauce to successful long-term investing is not trying to pick a winner, but to let the market win for you,” said Tuchman.  “Portfolio indexing allows you to do this in a manner that is low cost and low risk.”

“The book that had the biggest impact on me as an investor is The Future for Investors by Jeremy Siegel.  My strategy is to buy good quality dividend paying stocks at attractive valuations, reinvest the dividends and then see if such a portfolio can beat an index fund over a ten-year period,” said Heller.  “I think this competition will be a great learning experience.”

If history is any guide, Tuchman expects to come out on top, given Buffett’s victory in 2017, when his pick of a Vanguard S&P index fund delivered an annual return of 8.5% compared to the 2.4% average annual gain delivered by his opponent. The bet can be viewed at http://longbets.org/829/

About AAII

The American Association of Individual Investors is an independent, nonprofit corporation formed for the purpose of assisting individuals in becoming effective managers of their own assets. Since inception in 1978, AAII has helped over 2 million individuals build their investment wealth through programs of education, publications, software and grassroots meetings.  For more information, visit https://www.aaii.com/.

About Rebalance

Rebalance is a mission-driven, award-winning investment firm committed to offering premium, fiduciary wealth management services to everyday investors. The firm is at the forefront of providing consumers with a fundamentally different and better set of investment options: lower costs, endowment-quality globally diversified investment portfolios, and systematic rebalancing.

Rebalance is headquartered in Palo Alto, CA and Bethesda, MD and currently manages more than 600 clients with more than $750 million in financial assets. In 2018, Rebalance was honored by Schwab’s 2018 Pacesetter IMPACT Award™ for Innovation and Growth. For more information, visit https://www.rebalance360.com.