Key Takeaways
- • Meb Faber, CIO of Cambria Asset Management, argues investors should ask whether any investment product "serves me or the seller," and says the default answer to most new private-market and alternative products should be no.
- • Faber criticizes the push to "democratize" private markets, warning that the word signals fees, and contrasts near-zero-cost index ETFs with products charging around 4% or more.
- • Faber says a survey his firm commissioned found most retail and many professional investors wrongly believed a stock's price does not fall when it pays a dividend, and he argues high-dividend income strategies are a poor choice for taxable investors.
- • Faber dismisses the blurring of investing and gambling, including proposed '40 Act products wrapping up event contracts, as "a spaghetti cannon of nonsense."
- • Faber advises a written base portfolio of global, buy-and-hold holdings, with alternatives added only if they demonstrably benefit the portfolio.
Summary
In an excerpt from The Long View podcast with Morningstar's Amy Arnott and Ben Johnson, Meb Faber, chief investment officer of Cambria Asset Management and author of Investing in America: The Rise of a 250-Year Bull Market, pushed back on the industry's effort to expand retail access to private equity, private debt, venture capital and similar assets. He said that "every time I hear the word democratize, I hear someone's about to charge me a lot of fees," and noted that low-cost index funds, which launched in the 1970s at roughly 45 basis points, now cost around 5 basis points or less, with some portfolios of ETFs carrying negative expense ratios after securities lending.
Faber's guidance is that most investors should default to a simple, globally diversified, buy-and-hold portfolio with annual rebalancing, which he said can be built with a small set of low-cost ETFs. He acknowledged a personal appetite for farmland and angel investing, which he said he has done across more than 400 startups, but argued that such allocations are not necessary for most investors. He also flagged tax considerations, citing qualified small business stock (QSBS) rules and Section 351 conversions, and said tax efficiency can matter more than investment alpha.
On the blurring of investing and gambling, which Johnson raised in the context of possible '40 Act funds holding event contracts, Faber said the answer is to test products against a "lie detector" question: whether the portfolio manager owns the fund personally. He said Cambria's approach is to launch only funds it would invest in itself, and that the average mutual fund and ETF manager puts $0 of their own money into their funds. He also cited a Cambria survey, which he said cost many thousands of dollars, in which most retail and many professional investors misunderstood dividends, believing a stock's price does not fall when a dividend is paid. He argued that high-dividend and income strategies are a poor fit for taxable investors and referenced Berkshire Hathaway's practice of repurchasing shares rather than paying dividends. The discussion closed with a reference to Charlie Munger's fishing-store parable ("Am I the fish or am I the fisherman?") and to Ferdinand Pecora's-era critique in Where Are the Customers' Yachts?, which Faber said remains relevant in 2026.
Faber's guidance is that most investors should default to a simple, globally diversified, buy-and-hold portfolio with annual rebalancing, which he said can be built with a small set of low-cost ETFs. He acknowledged a personal appetite for farmland and angel investing, which he said he has done across more than 400 startups, but argued that such allocations are not necessary for most investors. He also flagged tax considerations, citing qualified small business stock (QSBS) rules and Section 351 conversions, and said tax efficiency can matter more than investment alpha.
On the blurring of investing and gambling, which Johnson raised in the context of possible '40 Act funds holding event contracts, Faber said the answer is to test products against a "lie detector" question: whether the portfolio manager owns the fund personally. He said Cambria's approach is to launch only funds it would invest in itself, and that the average mutual fund and ETF manager puts $0 of their own money into their funds. He also cited a Cambria survey, which he said cost many thousands of dollars, in which most retail and many professional investors misunderstood dividends, believing a stock's price does not fall when a dividend is paid. He argued that high-dividend and income strategies are a poor fit for taxable investors and referenced Berkshire Hathaway's practice of repurchasing shares rather than paying dividends. The discussion closed with a reference to Charlie Munger's fishing-store parable ("Am I the fish or am I the fisherman?") and to Ferdinand Pecora's-era critique in Where Are the Customers' Yachts?, which Faber said remains relevant in 2026.
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