Readers will have maybe noted that a great deal of the money being invested by retail investors is going into ETFs and most of those, although now a decreasing proportion, will be passive index trackers. In addition, plenty of money goes into mutual funds that are passive, and even model portfolios where the asset allocation may be varied a bit from time to time, but the underlying strategy is largely far from active and trackers are used to get market exposures.
The founder of Vanguard, which firm is now one of the largest owners of lsited investments in the world, made his name arguing that paying for portfolio management was a waste of time because the vast majority of managers in the USA failed to beat the S&P 500 index consistently. Now, we all know that is not a very complete rationale (why would the S&P 500 be your sole benchmark?, for instance) but if the index makes enough money over the long term to meet your investment objectives and it can be tracked very cheaply, why not do that? Clearly, a great many people have agreed that was the way to go!
You must be logged in to post a comment.