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
Back in 1984, Warren Buffett wrote an article entitled “The Superinvestors of Graham-and-Doddsville” (referring to the book Security Analysis co-authored by Benjamin Graham and David Dodd) in which he argues that passively managed funds can generate alpha for investors (beat the market) more so than actively managed funds. In the July issue of Advisor Perspectives, Larry Swedroe bolsters this argument through a discussion of his book The Incredible Shrinking Alpha (co-authored with Andrew Berkin and published early… Read More
“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
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
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
Passive investing in index funds has gained a lot of steam in recent years. But top-performing fund manager David Winters says index-fund investing can actually be dangerous.
In a wide-ranging interview with Barry Ritholtz on Bloomberg’s Masters In Business podcast, Charles Schwab’s Liz Ann Sonders offers her take on the bull market, and a look at her early years working for the great Martin Zweig.