There are just so many dogs in the active space it drags down the cumalitive returns of all of them.  Good read.

There are just so many dogs in the active space it drags down the cumalitive returns of all of them.  Good read.

I think the bottom line was, there is a BIG difference between comparing (for example) a large-cap domestic equity fund to the S&P 500, and comparing a fund like Blackrock Global or First Eagle Global or IVY Asset Strategy to any particular index.  When all of those "active vs. passive" comparisons are made, they ONLY use index-specific/style-specific funds in their comparisons.  In other words, they completely discount the funds that are more allocation/go-anywhere-type funds as if they do not even exist. 

I generally agree, it is very tough for style-specific funds to beat their RELEVANT indexes.  Not many do it.  But when you begin looking at funds that have a lot of latitude in the assets and strategies they employ, the comparison of active vs. passive gets fuzzy.

Also, how do you categorize an advisor/investor that employs passive investments but manages their allocations actively?  Is that active or passive?

Diversified.

Know how I know a smart active manager can consistently beat the market?  Because individual investors have been proven to consistently underperform the market.  So it's not all random! 

Now if only I knew how to identify smart active managers.

Personally, I mostly use ETF and funds in a contrarian fashion and this has worked pretty well over the last couple of years.  Not blowout well and not for long enough to make a big deal of it, but well enough to keep at it for a while.

Me too. Like you say, well enough to keep at it.

A lot of what I have been seeing lately on this topic points to the fact that even passive funds need to be actively managed (the asset allocation that is).  I think this is where Boogerheads fall short.  They think "index" investing is "set it and forget it".

[quote=B24]

I think the bottom line was, there is a BIG difference between comparing (for example) a large-cap domestic equity fund to the S&P 500, and comparing a fund like Blackrock Global or First Eagle Global or IVY Asset Strategy to any particular index.  When all of those "active vs. passive" comparisons are made, they ONLY use index-specific/style-specific funds in their comparisons.  In other words, they completely discount the funds that are more allocation/go-anywhere-type funds as if they do not even exist. 

I generally agree, it is very tough for style-specific funds to beat their RELEVANT indexes.  Not many do it.  But when you begin looking at funds that have a lot of latitude in the assets and strategies they employ, the comparison of active vs. passive gets fuzzy.

Also, how do you categorize an advisor/investor that employs passive investments but manages their allocations actively?  Is that active or passive?

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Active, this is what my practice is about. Using index funds (ETF's) but actively in or out of the fund.