Masters in Business

Charles Ellis on the Passive Investing Fallacy

The best approach for individual investors.

This week in our Masters in Business podcast we revisit a conversation with Charles Ellis, chairman of the Yale Endowment and founder of Greenwich Associates. This is our second conversation (the first is here) with the finance legend.

Ellis is one of those people who can break down the complicated into simple understandable language, filling his discussion with smart, insightful and whimsical observations. Ellis explains how his start in finance was the result of a grand accident -- he thought he was going to join the Rockefeller Foundation to give away money, but instead he was asked to manage it for the Rockefeller family office. Thus, one of the great careers in modern finance came about through a misunderstanding.

Despite working with big institutions his entire career, Ellis advocates low-cost index funds as the best approach for most individual investors. No surprise, since he’s a director of Vanguard Group Inc. But he rails against the term “passive investing,” which he believes understates what it entails.

Ellis is the author of 16 books, including “Winning the Loser’s Game,” which just published the seventh edition.

You can hear the full interview, including our podcast extras, at iTunesSoundcloud and Bloomberg. All of our earlier podcasts can be found at  iTunesSoundcloud and Bloomberg.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Barry Ritholtz at britholtz3@bloomberg.net

    To contact the editor responsible for this story:
    James Greiff at jgreiff@bloomberg.net

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