The Active-Passive Choice
Investors are always so busy celebrating market highs that they miss the peak out moment. So, most investors tend to wake up long after the market corrects. The only way to ensure one is alert to the market highs is to follow an active-passive approach that is dynamic.
This requires skill, concentration, analysis, process discipline, and action. If these are not put in constant play, active management as a business will end up underperforming very badly. So, the underperformance we now see in the active management of large-cap mutual funds is not accidental. It is the outcome of long years of gradual decay, process degradation, and indiscipline.
Large-cap mutual funds are merely a classic example. And, a very glaring one at that. Advisors and investors run an even bigger risk by being passive over such actively managed mutual funds. The future is definitely not going to be as easy as the past. The message for investors is clear. Active Portfolio investing is fast becoming complicated.
The choice is to beat that complication through a superior investment process or to accept the ordinariness of index investing. This is an hour to make choices on what works for you.