How to Focus on Increasing Your Wealth, Not the Investment Industry's

Consumer activism and investment education, i.e. this is not a commercial site.

Site Content

Introduction to Transparent Investing

The purpose of this website.

Three Different Perspectives on Investment Expertise

The need to act like an investment advisor, a CFO and an academic researcher

Detailed Article: The Full Story

A fifty-page pdf detailing the concepts of Transparent Investing


Educational Material Only

All of the material on the website is intended solely for educational purposes and should not be construed as investment advice specific to any particular individual’s situation. The information contained herein was carefully compiled from sources believed to be reliable, but accuracy cannot be guaranteed. All comments, opinions and information are provided with the understanding that investment advice, legal, accounting, or tax services are not being offered through or by Patrick Geddes. In particular, none of the examples should be considered advice tailored to the needs of any specific investor. All investors seeking specific advice should do so from competent professionals in any of the aforementioned areas before investing. Study carefully the prospectus and other information before making any investment.

With respect to the description of any investment strategies described in any of the material available on, no assurance can be provided that they will perform as expected and as described. It is important to understand that good past performance does not guarantee good results in the future. Future performance and risk may be different from the past. Every investment program has the potential for loss as well as gain. 

Please do not contact Patrick Geddes or his employer, Aperio Group LLC, seeking advice or recommendations on the investments discussed in the material on Neither Patrick Geddes nor Aperio Group LLC is seeking wealth management clients. is not soliciting business on its own behalf, on the behalf of Patrick Geddes or on the behalf of Aperio Group LLC. Seriously, folks, it’s not a back-door sales effort, but rather just an effort to educate consumers.

Introduction to Transparent Investing

Transparent Investing describes a simple yet highly effective approach to investing available to almost anyone in the United States with assets to invest. This approach is already widely used by lots of smart individual investors and is even more widely used by institutions. The basic idea is to use index funds to construct simple portfolios that can help investors achieve their goals in the most cost-effective way.

This web site provides both investment insights but also some consumer advocacy. The financial services industry offers a myriad of ways to purchase advice on and management of portfolios for investors. This web site offers some insight into how investors can make smart decisions regarding what services to buy and how much to pay. Many investors approach investing with significant intimidation due to the complexity of the whole process. To some extent that intimidation is warranted, but to a significant extent a deceptively simple solution exists that too rarely gets mentioned by investment advisors or brokers because the simple solution is great from the perspective of an investor but terrible from the perspective of an advisor.

Transparent Investing can be viewed as a wake-up call to investors everywhere to pay a lot more attention to fees. While fees don’t sound like the most interesting part of investing, a lot of research supports the notion that they are one of the most important parts of investing. 

Transparent Investing arose as a result of an article published in December 2006 in San Francisco magazine titled “The Best Investment Advice You’ll Never Get.” The article (link here) tells the story of how indexing as an approach to investing got its start in an applied way in San   Francisco in the 1970s. It also described Aperio Group, a money management firm in the San Francisco Bay Area that manages money based on the principles of indexing. The article clearly hit a raw nerve with readers of the magazine since Aperio Group received over 500 phone calls and e-mails from investors seeking advice on how to invest. Most of the callers expressed how they had always suspected that they were getting ripped off in some fashion by the investment world, but couldn’t quite articulate how until they read the article.

Since Aperio Group was not and still is not actively seeking clients for the kind of advice or service known as wealth management, the firm offered a free investment workshop in San Francisco in early February to over 100 people who had contacted us because of the article. The response to the workshop was overwhelmingly positive since people wanted to hear both advice and learn about how to be savvy shoppers in the investment world. Many attendees were also shocked that they didn’t have to listen to a sales pitch.

Investment Expertise

Wearing Three Different Hats When Looking at Investing

Any investor should look at investing from three different perspectives when choosing a portfolio, which I’ll describe here as wearing three different hats. I’ve worn each one of these hats in my career, so I know these viewpoints personally.

The first hat is that of a Chief Investment Officer (CIO), the person at an investment firm that sets policy on how client portfolios should be invested. CIO happens to have been my job for an investment management firm. A CIO looks at producing the best overall combination of risk and return, tailored to a particular investor. A good CIO would tell you the following about indexing:

Chief Investment Officer

First look at your total portfolio rather than just the individual pieces. Your total portfolio should be diversified, which means an optimal blend of different asset classes since that’s how you lower risk without sacrificing return. Furthermore, you should choose within each asset class the investments that will provide the highest level of return for the amount of risk borne. Indexing provides a superior way to achieve the best returns for most asset classes since the returns have historically been higher than active management. 

The second hat to wear when analyzing a portfolio is that of a Chief Financial Officer (CFO), the person at a company responsible for analyzing the company’s cash flows and planning for how the company can maximize profitability. CFOs look at cash inflows and outflows, and any good CFO helps a company control costs. I used to be the CFO of a $40 million company (Morningstar), and I also spent five years as a corporate financial analyst for a large oil company. A good CFO would say the following about indexing:

Chief Financial Officer

Focus on both cash outflows as well as inflows. Most investors ignore fees because they believe (erroneously) that they will be earning superior returns that justify the fees they pay. As your CFO, I recommend that you should be stingy with fees, since good CFOs know how to save their companies money by finding low-cost services. They know how to balance the trade-offs for services the company actually requires while avoiding paying for useless services. Furthermore, CFOs look at taxes as just another cash outflow, whereas most investors incorrectly view taxes as proof of success rather than as an unnecessary drag on after-tax returns. Index funds offer the lowest fees, the best trade-off of cost and return, and the least amount of loss to income taxes.

The third hat to wear when analyzing a portfolio is that of an academic research professor at a business school. I’ve taught graduate-level finance and portfolio theory for eight years, and I’ve been the Director of Quantitative Research at Morningstar. I’ve also spent a lot of time studying the body of academic research on indexing. 

Good research professors understand all of the complex intricacies behind analyzing whether or not active management on average earns a higher return for investors than indexing. Within academic finance, there remains no serious debate about whether on average active money management adds value to investors for U.S. stocks—it destroys value on average. There is interesting debate as to whether the best money managers can beat the indexes consistently over time, since some managers do sometimes beat the market. The challenge, however, is not identifying afterwards the managers that beat the market; instead the challenge is identifying in advance which managers will beat the market going forward. Data on foreign, (non-U.S.) stocks have been more mixed, although it’s still an effective strategy. A good research professor would say:

Research Professor

The academic research on U.S. stocks overwhelmingly shows the superiority of indexing over the average active manager, certainly in the mutual fund world. Even though a few managers do manage to beat the index, the odds are heavily stacked against being able to pick the managers that will beat the market in future. Thus the smartest default for individual investors is to choose indexing since it’s so effective and yet so simple. Furthermore, the institutional investment world that has the best access to the superior managers relies much more heavily on indexing than individuals even though institutions generally are not subject to income tax. While some active strategies can beat the market, you should still default to indexing because of the oft-repeated research results.

Thus all three hats, the Chief Investment Officer, the Chief Financial Officer and the Research Professor all come to the same conclusion, that indexing is a very effective way to invest.