Investing money on the stock market can be very intimidating.

Most people believe that to be successful at it, you need to be glued to a computer screen 24/7 and act like Jordan Belfort.

But in his very latest annual letter to shareholders of Berkshire Hathaway Inc, Warren Buffett offers some sage words [and proof] which will save millions of people a lot of retirement money.

The advice?

‘Never invest your money with any fund that charges you high fees to manage your money.’

In his illuminating example, money was invested in a number of hedge funds over a period of 10 years, which actively managed the money for best possible return and then money was left passively in an index tracker fund over the same period of time.

The compounded annual increase to date for the index fund is 7.1%, which is a return that could easily prove typical for the stock market over time. That’s an important fact: A particularly weak nine years for the market over the lifetime of this bet would have probably helped the relative performance of the hedge funds, because many hold large “short” positions. Conversely, nine years of exceptionally high returns from stocks would have provided a tailwind for index funds. Instead we operated in what I would call a “neutral” environment.

In it, the five funds-of-funds delivered, through 2016, an average of only 2.2%, compounded annually.

That means $1 million invested in those funds would have gained $220,000. The index fund would meanwhile have gained $854,000.

Bear in mind that every one of the 100-plus managers of the underlying hedge funds had a huge financial incentive to do his or her best. Moreover, the five funds-of-funds managers that Ted selected were similarly incentivized to select the best hedge-fund managers possible because the five were entitled to performance fees based on the results of the underlying funds.

I’m certain that in almost all cases the managers at both levels were honest and intelligent people. But the results for their investors were dismal – really dismal. And, alas, the huge fixed fees charged by all of the funds and funds-of-funds involved – fees that were totally unwarranted by performance – were such that their managers were showered with compensation over the nine years that have passed. As Gordon Gekko might have put it: “Fees never sleep.”

Morale of the story [according to Buffett, because we are not allowed to offer you any kind of financial advice] – simply buy an index tracker like Satrix.

But isn’t this the case for so many things in life?

Do yourself a favour, read the letter. It’s an easy read and could well save you a lot of money.