In an article for the Wall Street Journal that was excerpted from his new book, “Stay the Course: The Story of Vanguard and the Index Revolution,” John Bogle, the founder of The Vanguard Group and creator of the first index mutual fund asked an interesting question: “What happens if it (indexing) becomes too successful for its own good?” More →
Introduction
There are two investing worlds. One is the world of active investing where the fund manager you hired analyzes company after company and invests in those they think are the best. The passive manager simply disperses your funds over an index where you will perform exactly as the market performs. With passive investing, fundamentals, dividends, growth, sales, scandals, and business trends don’t matter at all. More →
Introduction
A recent Wall Street Journal article described how BlackRock (NYSE: BLK) is switching to robots from using humans to improve its stock picking for its actively managed funds. BLK’s reasoning is that its stock picking unit lagged in performance and has had many withdrawals that cut assets under management to $275 billion from $317 billion in the last three years despite the S&P 500 surging 27% in the same period. The hope is that robots will perform better at lower cost. More →
Introduction
Yesterday we discussed how the economy is doing well but that the market isn’t responding accordingly. This is because of the high valuations where only exceptional catalysts can push the market higher while any kind of negative news easily brings it into negative territory. However, by analyzing recent earnings, we have found large discrepancies among sectors in revenue and earnings growth. We understand this is normal for a well-diversified portfolio, but do we have to own more of the overvalued stocks and less of the undervalued stocks as a market capitalization weighted index fund does? More →
Whenever you find yourself on the side of the majority, it is time to pause and reflect. – Mark Twain.
Introduction
In the everlasting debate between passive and active investing, passive investing is currently winning. More money is flowing into passive than actively invested funds, and many celebrate victory and the death of stock pickers. Stock market movements are influenced by money flows and if more money flows into passive funds, they will clearly outperform the competition.
In today’s article, we’ll take a look at what is going on in the world of actively and passively managed funds, and will discuss a third option. An option that’s cheaper and one where your returns don’t depend on money market flows all that much. More →