Greenblatt on Why Passive, not Active, is Best for Most Investors

“I think the big move now is from active [investing] to passive, and that’s good for most people,” says Joel Greenblatt, Managing Principal of Gotham Asset Management and the guru Validea’s “Earnings Yield Investor” is based on. In a recent interview with CNBC, Greenblatt shared his opinion that “most people shouldn’t be picking individual stocks unless they know how to value businesses. That’s hard work, and a full time job.” When it comes to selecting… Read More

Buffett Preaches the Virtues of Passive Investing for Most Investors

Warren Buffett delivered a “sermon” (his word) at the annual Berkshire Hathaway investors meeting. His message? “All the commercial push is behind telling you that you ought to think about doing something [with your investments] today that’s different than you did yesterday,” but, he said: “You don’t have to do that. You just have to sit back and let American industry do its job for you.” According to Buffett, passively investing in an S&P 500… Read More

How Will Increasing Passive Investment Affect Market Efficiency?

Writing for Bloomberg View, Stony Brook professor Noah Smith asks, “As passive [investing] takes over more and more of the asset-management universe, will the market become more efficient or less?” To get there, he begins by noting the “stunning” and ongoing “shift from active to passive investment management” may be “the biggest story in the finance industry during the past decade.” The graph below illustrates the change. He suggests that the development may result in… Read More