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Thursday, July 18, 2019

The March of Indexing

Today's Wall St Journal story "Passive Investing Resumes Its March" is a cautionary tale for investors and investment firms alike.

Screenshot from Wall St. Journal.

Passive index funds outperform when markets rise to new highs (as they have done consistently for how many years? ah, maybe 200 or more). And active managers, may occasionally beat the indexes especially during bear markets.

The question remains, will markets continue their rise? Is passive investing an act of faith or is it based on more than just history? All one actually can know is the history.

There are counter-examples-a famous one of the investor in 1900 who spread his wealth among 10 different countries and lost everything except in the US and England.  Every other market, and currency for that matter, was destroyed due to war, inflation or depression.

There may be a conditional proof that indexing outperforms active management.  But, for most investors the decision is made.

Feel free to post comments.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.

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