Are We Going to Regret Our Passive Investment Strategies?
What else might we regret financially, ten years from now?
Just in case you wanted to feel a little nervous about your plan to invest in low-cost index funds, MarketWatch asked a bunch of financial bloggers what financial ideas might look “embarrassing” in 10 years, and many of them said “passive investing.”
Passive investing. If a manager approached you with a portfolio of 500 stocks constructed the way the S&P 500 is, you’d think they were nuts. But it’s become accepted that anything else is “active” and therefore dangerous. The greatest trick the S&P 500 stock selection committee ever pulled was convincing the world it didn’t exist.
To be fair, that quote comes from Tobias Carlisle, who just happens to be a managing partner at Carbon Beach Asset Management. Jesse Felder, who also told MarketWatch that we would be embarrassed by passive investing, used to work at Bear Stearns and then founded his own hedge fund firm. (He is currently an “independent investor,” according to his Twitter bio.)
So, okay, people who actively manage investments think we’ll be embarrassed by passive investing. But I found Carlisle’s quote interesting because it does remind us that the S&P 500 isn’t an arbitrary stock index; a group of people actively put those 500 stocks together.
What do you think we’ll regret financially, ten years from now? Not saving more? Not investing in whatever company becomes the next Amazon? Spending our money on experiences instead of things? Buying too many lattes???
