Roger Schreiner

The Active vs. Passive Funds Debate: Who Wins?

Tom,

There should be no debate, passive investing is risky and dangerous to your wealth. I would not consider any of the stuff in your list as seriously "active." Just because they move things around, they stay full invested. "Active investing" should include cash or money market at times of high risk.

As you know we "actively manage" our portfolios on a daily basis. Almost all of our strategies were positive or flat on the year, we even had two that were up double digits, one of them up about +30% in 2008. Our active portfolios take LESS RISK than passively invested strategies, and LESS RISK than those you classify as active (above).

Do you know ANYONE who would select a passive approach over an active approach in a goal-oriented endeavor? Niether do I. Investing is no different than any other goal-oriented endeavor, you need to actively manage your assets to prevent getting killed in markets like we are experiencing.

It is sad that the mutual fund industry has persuaded investors to accept passive investment as a serious approach. Any approach that does not have an escape plan is worthless. It is time to be honest.

There are advisors and firms out there that can outperform buy-and-hold. Justs because there aren't many, isn't an acceptable reason to buy and hold. I can't believe it's ever sensible to buy-and-hold, the risk is just too great. It's time to be honest with the American public and with individual investors about the unacceptable high risk of buy and hold.

Roger Schreiner
Schreiner Capital Management
scminvest.com