Billionaire Warren Buffett swears by this inexpensive investing strategy that anyone can try

In the past 20 years, low-cost index funds have dominated the investing landscape.

The primary structure that is used to invest in index funds has tax advantages and is cheaper than investing in most mutual funds.

Warren Buffet's declaration that investing in index funds had won out over investing in active management was definitely a pivotal moment.

In 2007, the year was 2007. The bet was made with a New York City money management firm that runs funds of hedge funds.

The bet was that the S&P 500 would beat a portfolio of five hedge funds of funds over the course of 10 years.

A proxy for the S&P 500 was chosen by billionaire investor Warren Buffet. The S&P index fund had a return of 125.8%, while the five fund of funds had an average return of only 36.3%.

If Group A and Group B comprise the total investing universe, and B is destined to achieve average results, that's what the equation is.

When trillions of dollars are managed by Wall Streeters charging high fees, it will be the managers who reap outsized profits. Low-cost index funds should be used by both large and small investors.

For almost a century, savvy investors and traders have known that active fund managers have a bad track record.

The record of active managers has been tracked by Standard & Poor's for more than two decades. When adjusted for fees and funds dropping out due to poor performance, the mid-year report shows that 80% of large cap actively managed fund managers lose money.

The performance of active managers was worse than expected according to a survey by Standard & Poor's.

Active management has a poor performance. The fees are too high and that erodes out performance.

Fund managers often do too much trading, which can cause investing mistakes and lead to higher tax bills.

Professionals who are trading against each other have access to the same technology and information as their competitors. Most don't have an advantage over their competitors.

It is worth checking out low-cost index funds if you are a skilled value investor like Warren Buffet.

Bob Pisani wrote "Shut Up and Keep Talking: Lessons on Life and Investing from the Floor of the New York Stock Exchange"

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