Indexing Beats Smart-Beta Track Record

Many smart-beta funds– which develop portfolios focusing on various factors such as low volatility, value, or momentum– have underperformed the market, especially after accounting for fees and expenses. This according to a recent MarketWatch article which concludes, “Tally another point in the pro-indexing column.” While the article points out that the rate of outperformance depends […]

Warning to Index Fund Investors

The more investors index, the higher the costs for those that don’t, according to a recent MarketWatch article. The benefit of indexing–lower costs and higher long-term returns—only exists, the article argues, if there is an “active, functioning market underlying whatever index a fund is trying to capture the performance of.” The problem arises, it asserts, in […]

Fool’s Gardner on Active Versus Passive Investing

In a recent interview with WealthTrack’s Consuelo Mack, Motley Fool’s Tom Gardner shares insights regarding active versus passive investing and where he sees market opportunities. Tom Gardner, who’s mission through his Motley Fool multi-media network of financial services is to “help the world invest better.” He asserts his belief that index investing is the best […]

The Math of Stock Picking Works Against Active Managers

The concentration of gains in a minority of index fund holdings—a statistical concept called positive skew—makes it extremely difficult for active managers to beat benchmarks, according to a recent Bloomberg article. Research conducted in 2015 found that “the distribution of returns in the stock market is bizarrely lopsided,” the article argues. “It’s a pattern of returns that […]

Is It Time for Active Managers to Shine?

“Passive funds tend to attract more inflows after the underlying indexes have performed well, so they’re driven by momentum rather than by analysis of company valuations and fundamentals,” according to a recent article in Barron’s. The article quotes Mike O’Rourke, chief market strategist at Jones Trading, who argues that passive strategies “have a place in […]

Index over Active Management Still Requires Discipline

The inevitable periods of underperformance often suffered by active managers—coupled with their relatively high fees—make index investing a more attractive option for many investors. This according to a recent Globe and Mail article by Validea CEO John Reese. Reese writes, “By Mr. Buffett’s reckoning, investors have lost out on $100 billion in fees and underperformance […]

Greenblatt Blends Active and Passive Strategies in New Fund

Joel Greenblatt, managing partner of Gotham Asset Management, may have figured out a way to make active strategies appeal to passive investors, according to a recent article in Forbes. The legendary investor and author of The Little Book that Beats the Market (2010) has started a new fund called the Gotham Index Plus Fund that […]

Active Funds Perked Up in January

January was a good month for actively managed funds, says a recent Bloomberg article that states, “the majority of actively managed value funds in the U.S. and Europe outperformed their benchmarks in January.” This according to strategists at Lyxor Asset Management. Most European growth funds also beat the market, the strategists recently wrote. However, Lyxor […]

Mauboussin on Active Vs. Passive Management

A paper co-authored by Michael Mauboussin of Credit Suisse addresses important issues to consider in relation to the continued and increasing shift from active toward passive fund management. Those investors who are moving their money to passive funds, the paper argues, are “less informed than those who stay.” For every winner, it says, there must […]

Jack Bogle on Indexing: “Math is Math”

Back in 1976 when John “Jack” Bogle started the first index fund, his goal was to “capture the overall market’s return at much lower costs than the stock picking fund managers who so often failed to match it,” writes Bloomberg’s Michael Regan in a recent interview with the octogenarian and retired head of Vanguard. The lengthy […]