Reply to As an advisor, into the shark tank...

Forum Index » Money and Finances

Reply to "As an advisor, into the shark tank..."

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=OTAlexFA][quote=Anonymous]Why don't I just put my money in index funds rather than you? Will your fee + the returns outperform index funds + fees?[/quote]

This one feels like a trap.   :)

In a bull market?  Maybe not.  Index funds are outstanding when everyone is making money.  However, are you going to tactically manage those passive funds?  If not, you can guess what happens when the market "corrects" (a term I don't like).  You'll get virtually 100% of the market growth now and then virtually 100% of the downcapture, as well.  There's no hedge.  As most of us know from math, if you lose 20%, it takes 25% of gains to get back to even.

Index funds are very popular, particularly on DCUM, I've seen.  I like them.  I use them.  The question is, does it fit your strategy?  What's your time horizon?  What's your goal?  Index funds are great; they just aren't a cure-all.[/quote]
NP here.  This answer is ridiculous.

Index funds get you market average returns for nominal fees.  They do that in bull and bear markets.

Active management only guarantees higher fees.  It's possible that active management will outperform or underperform in a bull market.  It's also possible that active management will outperform or underperform in a bear market.  There is nothing magical about a "hedge" that lessens the amount of your bear downcapture in a way that more than offsets the drag you feel during the bull run where you are underperforming due to holding that same hedge.  There are plenty of active managers who have overweighted cash the last 5 years as a "tactical" strategy for a correction that never happened - active managers have no magic crystal ball to know when the next correction will occur.  Your answer is just the marketing speak that active managers use to draw you away from the fact that active management, over the long run (i.e., multiple market cycles) is statistically likely to underperform the market as a whole, as it's very difficult to overcome the headwind of significant fees over the long run.

I personally use both active and passive strategies, but the simplistic notion that active management outperforms during bear cycles is disingenuous.[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics