The surprising power of doing nothing

The case for passivity. Jeremy Siegel and Jeremy Schwartz analyzed the original 1957 S&P 500 list to test the performance of static portfolios versus active management (MaxDividends). A portfolio that held every original firm and its descendants—the Total Descendants Portfolio—returned 11.40% annually through 2003, outperforming the 10.85% return of the index itself (MaxDividends). This approach required almost no transactions, as the strategy involved selling only when forced by corporate actions and rarely realizing capital gains.

Mechanics of long-term wealth. Broad-market index funds capture global economic productivity by minimizing expense ratios and removing human intervention from asset allocation (Donald Williams from Donald’s Substack). Donald Williams notes that asset allocation accounts for over 90% of return variance, dwarfing the impact of individual stock selection or market timing. Investors who trade incessantly or chase recent top-performing assets often underperform simple benchmarks, as most actively managed funds fail to beat the market over two decades (Donald Williams from Donald’s Substack).

AI as a nudge. Emerging research by Valerie Baldinger suggests that LLM chatbots may finally succeed where human advisors have struggled by nudging retail investors toward diversified index funds (Arpit Gupta from Arpitrage). By analyzing 70,000 interactions between investors and AI models connected to real-world brokerage data, Baldinger found that these tools can effectively shift portfolios toward more disciplined, long-term structures.