The active vs passive argument never fades.
Today, passive investing has never been more popular. The shift to passive is accelerating.
Vanguard alone owns 5 percent of all US securities.
Take look at this chart of who owns our largest banks:
It seems so neat and tidy and efficient, but I don’t trust most of it.
We have gotten lazy. We have stopped thinking.
I for one feel that ‘passive’ investing is a marketing lie. Cullen Roche who writes at his great blog Pragmatic Capitalism wrote this a while back:
We Are All Asset Pickers
The rise of index funds has turned us all into “asset pickers” instead of stock pickers yet the “passive” indexing community has tried to sell indexing as though it’s something totally different from stock picking. The reality is that we are all discretionary decision makers in our portfolios. Even the choice to do nothing is a discretionary decision. Therefore, all indexing approaches aren’t all that “passive”. They’re just different forms of active management that have been sold to investors using clever marketing terminology like “factor investing” and “smart beta” in order to differentiate the brands.
The rise of the low fee index fund is fantastic. Index funds are a vast improvement over many of the high fee stock picking funds that are out there. But we need to understand index funds for what they actually are and not what they’re marketed as. Get informed on this debate as it’s one of the most important debates of our times as indexing grows in popularity.
Back to Jesse who writes:
…more investors are shunning “thinking” for “not thinking” than ever before and at the greatest rate ever seen. If you are one of the few “thinking” investors left today, this can only be seen as a wonderful advantage, perhaps the greatest advantage any “thinking” investor has ever seen before.
Our business headlines and airwaves are dominated with the same 5-10 hedge fund celebrities and the banks/bankers/analysts we saved back in 2008. Say goodbye to them for a while. Go cold turkey. Build a new ‘peloton’ on your social networks.
Active works and alpha is everywhere. For instance:
Coal is up 70 percent in 2016
Gold miners are up 100 plus percent
Zillow is up 16 weeks in a row
Yelp was left for dead but up over 50 percent this year
Etsy is up 50 percent
Brazil is up huuuuuuge
While the assets pour into ‘passive’ there is much alpha and opportunity in active. You have to know where to look and who to follow and build some new routines and try some new products and enjoy the process of thinking and practice the art of money management.
Also published on Medium.