Page 2 of 2

Passive is the New Aggressive (Part 3)

Key Points

  • There may be strong psychological reasons why financial firms can command such high fees.
  • Ultimately, these high fees can lead to the systematic transfer of wealth away from investors’ pockets.
  • The Efficient Market Hypothesis suggests that actively invested mutual funds face an impossible challenge in outperforming their passively invested counterparts.
  • Nevertheless, the fees for actively managed funds are much higher than those of passively managed funds.

Continue reading → Passive is the New Aggressive (Part 3)

Passive is the New Aggressive (Part 1)

Key Points

  • According to theory, on a forward-looking basis, stocks are priced such that each stock should offer its investors with the same risk-adjusted return as any other stock, irrespective of past performance.
  • Based upon this line of reasoning, outperforming the market is exceedingly challenging.
  • Given this, passive investing aims to keep investment choices to a minimum with the goal of selecting an appropriate benchmark and aligning investments as closely as possible to said benchmark, with minimal fees and cost.
  • Alternatively, active investing involves making purposeful decisions regarding the selection and timing of investments, in an effort to nevertheless outperform the market.

Continue reading → Passive is the New Aggressive (Part 1)