In a market where prices are determined by fear rather than an asset’s individual merits, it is hard to see how active management would be able to add alpha over the index, especially after fees. But markets dominated by fear are also volatile and often falling markets. In that kind of storm, having a pilot at the helm who understands how to navigate rough weather to minimise danger should be preferable to sailing through on auto-pilot.
Active vs. Passive
2 May 2012
In a market where prices are determined by fear rather than an asset’s individual merits, it is hard to see how active management would be able to add alpha over the index, especially after fees. But markets dominated by fear are also volatile and often falling markets. In that kind of storm, having a pilot at the helm who understands how to navigate rough weather to minimise danger should be preferable to sailing through on auto-pilot.
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In a market where prices are determined by fear rather than an asset’s individual merits, it is hard to see how active management would be able to add alpha over the index, especially after fees. But markets dominated by fear are also volatile and often falling markets. In that kind of storm, having a pilot at the helm who understands how to navigate rough weather to minimise danger should be preferable to sailing through on auto-pilot.
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