It’s interesting that the 1st index fund was started by Samsonite in 1971. There are different arguments on whether active and passive index funds provide investors with any long-term results or benefits. Basically, index funds are all about one of the fastest growing sectors when it comes to mutual fund businesses. Keep in mind that the amount of money invested in this sector increases on a daily basis so that it’s over $65 billion now.
Another interesting detail is that individual investors are a bit slow to embrace the right passive management. When it comes to institutional investors, they invest a bigger percentage of their assets in a passive manner. There are many individual investors who are just unaware and uneducated in terms of those important arguments and proofs that support this type of management and its advantages. Academics and institutional investors clearly know that passive investing is quite hard to beat so that most of active investors will fail in their attempts to outperform this market.
Besides, active indexers assert that they know how to outperform the market and achieve this goal. That’s because they passive index portfolios claim that they can mirror the performance of all the indices. It’s true that all investors have their bad and good times. For example, active indexers can raise their money when it comes to instability and increased risks, while passive indexers remain fully invested. For many investors, this can be very painful during the periods of huge declines in this kind of market.
Don’t forget that passive index portfolios mirror the gains of all the indices when bull markets are roaring, and they eventually outperform a big part of active money managers because they need to stay diversified. Sometimes, they also take extra risks trying to get the safety and performance that they promise their customers. Think about the modern bull market and you will get the necessary evidence that the average dollars managed by active indexers can’t keep up with a market index.
In conclusion, take into account that indexing is always a good way to avoid staying blind-sided in specific areas of this fluctuating marketplace. Think about active management themes because they may easily find themselves in a bad side of investments. There is one perception among many investors that the strategies created to match stock market returns are less risky compared to actively managed portfolios.
It’s interesting that the 1st index fund was started by Samsonite in 1971. There are different arguments on whether active and passive index funds provide investors with any long-term results or benefits. Basically, index funds are all about one of the fastest growing sectors when it comes to mutual fund businesses.