Peter Lynch: You Can’t Beat the Market if You Only Index

Barron’s recently profiled legendary investor Peter Lynch with a lengthy retrospective on his humble beginnings, his successful career at Fidelity and highlights from a December interview. Here are some key takeaways from Lynch’s comments on today’s market and the state of active investing: Lynch maintains that the state of active management—with most trailing their benchmarks—isn’t a new phenomenon. He argues that most indexes weight stocks by market value, leaning toward those that have already done… Read More

The Death of the Traditional Passive Fund

Fidelity’s annual global institutional investor fund survey, released in March, showed that institutional investors plan to turn more toward active strategies and smart beta products in the coming years. This according to an article in Institutional Investor. Of the survey respondents, which included 905 institutional investors in 25 countries, 41 percent of those from large institutions (of between $1 billion and $10 billion in assets) said they expected to increase their allocations to active strategies… Read More

Active Bond Managers are Beating the Market

When it comes to bond funds, says a recent article in The Wall Street Journal, “bargain shopping may not be the best idea.” Higher-priced portfolios assembled by active money managers, it reports, are “handily beating the cheaper index-tracking competition, largely because they are doing a better job protecting their portfolios from rising interest rates.” Citing Morningstar data, the article notes that 70% of fund managers who choose intermediate-term bonds are outperforming their passive peers, adding,… Read More

Combining Active and Passive Investing Can “Smooth the Ride”

A “partnership” of both active and passive investing can help smooth out some rough patches in portfolio performance, according to a recent Vanguard article. “The addition of a reliable investment partner—a broadly diversified, passively managed investment—can theoretically narrow the range of outcomes, helping you stick with a plan that offers the potential for outperformance while limiting the chances of significant underperformance.” Even the most skilled active fund managers, the article points out, will suffer periods… Read More

Alternative Data Could Be Last Hope for Active Managers

Stock pickers believe that alternative data—including digital footprints such as social media information, satellite images, etc.—can lead to outperformance against indexes, but the complexities associated with using such data can be a deterrent. This according to a recent article in Institutional Investor. Citing results of a survey conducted by Greenwich Associates (and sponsored by FactSet), the article reports, “60 percent of portfolio managers—the majority of them active—think that alternative data can help generate alpha, or… Read More

Jason Zweig Says Active Managers Also Underperform in Down Markets

Although the data continues to show that stock pickers have underperformed the market, writes Jason Zweig in a recent Wall Street Journal article, “active managers insist that they will make a comeback.” The article cites data provided this month by Bank of America Merrill Lynch that shows “63% of active fund managers investing in large U.S. stocks outperformed their benchmarks in April, the best since February 2015.” Active managers, writes Zweig, claim that the pricey… Read More

Ned Davis Sees a Passive Investing Bubble Expanding

As they relate to U.S. economic growth, the lofty expectations concerning the Trump administration seem to be cooling off, says a recent article in Barron’s. Since March 1st, the article states, the fifty biggest stocks in the S&P 500 are down by 1.8% and the fifty smallest are off by 5.4% (citing data from Bespoke Investment Group). Overseas valuations are more moderate, it asserts, and the dollar has “failed to rally further even after an… Read More

Active Investing Showing Signs of Life

Active managers have been struggling and stock hedge funds have seen a nearly eight-year performance slump, but a shift could be in the offing according to an article in last Friday’s Wall Street Journal. The article offers data from Bank of America Merrill Lynch showing that 58% of active stock managers beat their benchmarks in the third quarter and explains, “stock pickers say it is only a matter of time before they again ride high.… Read More

Active vs. Passive Results Linked to Market Cycles

Fees contribute heavily to the variance in performance among active and passive fund managers. A recent article in Investment News says that, according to Morningstar data, “higher fees have the biggest impact on performance,” with the largest variance existing in large-cap stock strategies. The data also shows that the divergence worsens as the time period gets longer. However, the article also highlights other research suggesting that results depend on more than just fee structure. Scott… Read More

Motley Fool’s Gardner: “Buy High and Try Not to Sell at All”

While passive index funds are all the rage, top-performing investor David Gardner says he still thinks investors will do better picking individual stocks than they would buying index funds – if they have the energy, time, and interest. And in a recent interview with WealthTrack, Gardner – the co-creator of The Motley Fool – talked about the stock-picking approach he has used to produce exceptional returns over the long haul. Gardner says he has made… Read More