Charles Ellis

Convinced us to index.

For investors, 2016 was the year of the index fund. Some $175 billion was yanked from actively managed funds, while $326 billion was stashed in passive ones. This shift came about in large part because of the ideas of investment consultant and author Charles Ellis—whose new book, The Index Revolution, sums up the case he’s been making for decades.

Back in 1975, Ellis wrote an article arguing that investors would come out ahead by simply avoiding mistakes rather than seeking to beat the market. Forty years of data have proved him to be prophetic.

Central to Ellis’s case is the huge impact of investment costs. “It’s easy to ignore a 1% fee if you’re earning 15% returns,” says Ellis. “But today you’re lucky to get 7%, which means a 1% fee takes nearly 15% of your returns.” In today’s world of low returns, that’s a message that has never been more urgent.