BUZZBONGO
Maintaining radical positions about any subject is a recurring fact in the world of investment. Depending on their affinities, biases, and preferences, investors take a position as being on one “side” or the “other side” and engage in bloody dialectical battles around this or that issue. The typical discussion has long revolved around technical versus fundamental analysis. In addition, within the “fundamental” camp, for example, internecine wars have also broken out, such as the deep value versus growth rivalry. The “bad vibes” are also spread to different types of assets, such as cryptocurrencies against the rest of the world. Or the war between investment strategists with radically acrimonious positions, such as dividends versus Compounders. The list is endless.
Active management and passive management are just one more example of these cockfights without a happy ending or practical purpose worth reviewing. The supporters of both fight to the death to be right and wield their corresponding arguments using graphs excels, and charts. In this sense, it has recently been perceived, or at least many have perceived it, as a movement against indexing, that is, the appearance of Bogle haters and his theories. Perhaps as a reaction to the previous movement in the opposite direction carried out by enthusiastic lovers.
The issue itself is not serious and its origin should be sought in businessAMP, as usual, that is, the good absolute and relative results of one strategy compared to the other and the change in the trend of those results. What this means is nothing more than the old story, connatural to the human race, of defenestrating and merciless with the loser and unashamedly flattering the winner. However, it is striking that both the “haters” and the “lovers” do not reflect on what they may have in common.
For example:
Therefore, the battles and wars around active and passive management are nothing more than small-time hobbies and wars based, on occasion, on the performance of the last year. Perhaps what happens is that an investor has failed to implement a certain investment strategy and then it is better to condemn the strategy than himself. Perhaps it happens that the investor has had bad luck with the moment in which he started investing and after a few years he is still in the red despite having been a “good believer” and having followed all the precepts and commandments of rigor. So it is better to blame the strategy than to recognize oneself that one was not a believer or had as much faith as at the beginning of his exodus he had thought he had.
However, and finally, we must always keep in mind that controversies and rows tend, like violence, to be carried out by very active minorities that make a lot of noise. However, the nuts of many investors are usually spread over several baskets and one might wonder to what extent the apparent rivalry between active management and passive management is not just another imposture from the world of finance and investment, reverberated by the echo of social networks. Or, put another way, it is very likely that the majority of investors combine both strategies with better or worse success and in equal or unequal balances and, therefore, that “haters” or “lovers” pertains to a boisterous minority but not at all representative of what the average investor tends to be. Which will be most likely.