There are some debates in finance that never go away. Does increasing tax rates increase or decrease tax revenue? Is stimulus good or bad for the economy? Then there’s this one: does an active or passive investment strategy result in a better performance.
Personally, I feel the passive strategy advocates have irrefutable evidence, but the debate lingers. Standard & Poor’s devotes an entire section of its website to regularly updating the performance of the two camps.
But it’s time to put this debate to bed and it turns out to be a relatively easy exercise because a passive investment strategy does not, and cannot exist. In Aristotle-like fashion, once an investor decide to cobble together a diversified portfolio of index funds, voila!, they are actively managing. Even the investor who decides to simply “buy the market” with an S&P 500 index fund has actively managed their capital.
So there is no debate, in my view anyway. It’s not a question of active versus passive, it’s a simply a question of how active you want to be.
