Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
A tiff broke out between the active versus passive crowd this week. Again. Don’t worry nobody got hurt…much.
Every investment strategy has an argument against it. The active vs. passive gets the most attention. Too much really. Personally, it’s nitpicking. There are points in time where every active strategy outperforms the market and other active strategies. Some are more consistent than others mind you. The right climate is needed too. And when one strategy gets too crowded, that’s usually when another tends to outperform.
Passive investing is just every strategy rolled into one. And it works on paper. Quite well, actually. When you invest in a large portion of the market or the total market you’re investing in growth, value, momentum, income, dividend, speculation, and any other strategy out there. Again, that’s only on paper.
The article is right that one can’t live without the other. That is passive doesn’t work if active investors don’t exist (active doesn’t need passive to exist). What’s more concerning and less discussed is the growing number and size of passive portfolios. It’s concerning because the failure point for passive investing is, and always will be, human behavior. As passive index investing continues to grows, behavior and emotion will play a bigger role in the markets.
If two market crashes since 2000 tells us anything, there’s huge opportunities ahead for the right active strategy or, at least, ignoring your emotions. As I said earlier, when one strategy gets too crowded, that’s usually when another outperforms.
You gotta love technology because we all need a computer on our wrist. At least it sounds interesting. Smart phones, glasses, TVs, and now watches. What’s next, smart pants? Or are we near a point where smart isn’t good enough? In the end, it looks like a smarter calculator watch. Look how well those did.
- What Buffett Believes But Cannot Prove – the benefits of being rational.
- The Importance of Paying a Bargain Price – this is why price matters.
- Be Wary of Even ‘Safe’ Investments – there’s risk in everything, including playing it “safe”.
- Invest With Warren Buffett’s Five-Year Plan – the benefits of turning off the market, figuratively.
- CAPE Ratio Calculator – something interesting for the stock pickers out there, it calculates CAPE ratio for individual stocks.