Video: the age-old debate of active management vs. indexing

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Screen Shot 2016-05-23 at 3.03.36 PMWhen it comes to investing philosophies, there are two camps that are almost diametrically opposed: so-called “active” security selection practiced by mutual funds, hedge funds and similar vehicles; and the low-cost “passive” approach epitomized by index funds and ETFs.

A good summary of this old chestnut can be found in the latest FWB TV video, which runs just under four minutes. It can be found by clicking on this highlighted link: He said, she said: the active versus passive argument.  In the investment industry, “she” is correct and her name is SPIVA® (S&P Indices Versus Active).

Is Mr. Active telling us the whole story?

You see, Mr. Active is being a bit of a rascal and not necessarily telling us the entire story. Mr. Active’s story has some holes in it. Which reminds us of the Collin Raye song titled “That’s My Story (and I am sticking to it).”

A while back we discussed how numbers lie, just like in this case. Mr. Active also seems to be guilty of the sin of omission. What is this Active rascal not telling us? If you’re as intrigued as we are, let’s watch and find out together.

For more on this theme, download the guide, 12 Essential Ideas For Building Wealth.