Reed Hastings only invests in index funds and Netflix

“The few times I’ve invested I’ve lost my shirt,” he said in a comment interview on the Tim Ferriss Podcast.

Hastings, who has an estimated net price of approx 6 billion dollarsattributed his poor track record to his behavior, which he said was ultimately not a superb fit for the world of investing.

“I realize I’m just so optimistic,” Hastings said. “Anyone who seems to have a good idea, I say ‘Sure!’”

Hastings stopped being more energetic in his investments when he realized this was the case optimism meant he wasn’t wired Just like the very best investors. “It’s a different DNA than [what] “Various levels of good investors did it,” he said.

Hastings said he has learned his lesson and now relies on funds that keep pace with the market somewhat than attempting to beat it, in addition to his stake within the streamer he founded. “I am a pure index fund investor. I’m Netflix plus index funds,” he said.

According to SEC filings, Hastings owns about 3 million shares of Netflix price about $1.9 billion as of publication.

A notable recent exception was Hastings’ investment in Powder Mountain Assets previously reported. He bought the ski area after the primary group of investors couldn’t implement their idea of ​​making it the Burning Man of the slopes.

Otherwise, Hastings appears to be pursuing a more traditional investment strategy, counting on index funds and company-granted stock options.

Index funds are secure investments in uncertain times

Index funds are investments that track a particular benchmark, equivalent to the S&P 500 or the Dow Jones Industrial Average. They are widely considered a secure way for investors to grow their investments on the pace of the market. As Hastings’ comments show, it might probably be very difficult for even the neatest person to beat the market.

Investors often put their money in index funds because they’ve a track record of success perform higher than actively managed funds Here an authority chooses what to take a position in. A 2022 study found that out of two,132 actively managed mutual funds Not a single one exceeded the performance its reference index. This has been a consistent trend for funds for years. Last yr marked that 14 years in a row The majority of actively managed large-cap equity funds that put money into large-cap corporations underperformed the S&P 500.

That might explain why they turned out like this so popular even amongst institutional investors this yr, when economic forecasts are somewhat nebulous. There’s been talk of a recession for nearly two years, the Fed still hasn’t made any firm commitments on rates of interest, and who knows if the unemployment rate will remain stable. Meanwhile, markets are currently recovering, but many investors are unsure whether the gains will proceed, while others are convinced that it will not be the case.

Despite all these unknowns, the S&P 500 – probably the most common benchmarks for index funds – is up 27% within the last 12 months. Much of the S&P 500’s growth was driven by technology stocks, including Netflix. But there are signs it could possibly be starting expand to other industrieswhich might strengthen investors’ portfolios.

Critics of index funds say they concentrate an excessive amount of power on too few people

The rise of index funds, first launched by Vanguard in 1975, created a brand new breed of economic manager, just like the CEO of BlackRock Larry Fink. BlackRock, for instance, manages $4.9 trillion in its index funds, making it one among the most important asset managers on the planet.

Index funds have also began a more theoretical debate concerning the structures of the market. Some claim their effectiveness is true conceptual proof for “market socialism” because index funds feature common ownership of collective assets. Bloomberg opinion author Matt Levine, who has written extensively about index funds, denies the concept reasoning: Just because an index fund allows its investors to collectively own an organization doesn’t mean all of them own the identical amount.

Another central issue within the dispute over index funds is who exactly manages them. Proponents say that by passively managing and not using a portfolio manager or investment skilled, they cut out financial middlemen, thereby reducing fees for on a regular basis investors. Most index funds have fees, called expense ratios, which can be lower than 1%. Still, critics say they’ve concentrated power within the hands of a number of corporations — including BlackRock and Vanguard. In 2018 Paper, Harvard law professor John Coates argued that ultimately only 12 people would make all investment decisions regarding index funds. A Morningstar analyst acknowledged that this could possibly be the case, however it hurts the middlemen, not retail investors. “Indexing has had the biggest impact on the financial advisory industry” the analyst wrote.

Regardless of what happens with the index fund industry or his specific investments in it, Hastings will all the time have his Netflix shares to fall back on. The stock is already up 35% this yr, adding about $496 million to Hastings’ net price.