A couple of weeks ago, I was trying to explain passive investing to some friends. I could tell from their expressions that my message wasn’t landing, so I decided to switch it up and use an analogy that they understood best: Alcohol. Here’s what I shared.
The cocktail sampler set
Imagine that you love cocktails. You’ve got a favourite cocktail bar close to your office, but what you really want us to try the best cocktails from all around the world.
Now, cocktail lovers will all know about the World’s 50 Best Bars list, which lists the top 50 bars from around the world. Someone came up with a methodology, used it to rank the bars, and collate them into a handy list. For many bars, it’s prestigious to get on that list, but at its core, it’s nothing more than just that: a list.
(I don’t particularly love cocktails, but I know about this list because my wife drags me to a bar on it every time we’re in a new city).
A good way to appreciate the world’s best cocktails is to simply visit as many bars on that list as you can. But that’s going to be expensive: In Singapore, an Old Fashioned can set you back $25-$30. Imagine visiting all the bars on that list and dropping $25 at each one. Add the travel costs, and it quickly becomes infeasible to try ALL the bars on that list.
Now, imagine that there’s a company offering a special “cocktail sampler set”. They’ve visited all the bars on the Top 50 list, bottled a tiny sample from each one, and sell the entire set of 50 samples to you. Every year, when the new Top 50 list is announced, the company simply refreshes their set. They discard the
