Passively Managed Funds

13 Apr

What The Last 100 Years Can Tell Us About Our Long Term Returns

At the beginning of this century, London Business School professors Elroy Dimson, Paul Marsh, and Mike Stauton wrote a seminal book on stock market investing titled Triumph of the Optimists where he described what has happened over the past 100 years.

Today, we’re going to go through his findings and through his updated findings that he publishes annually for Credit Suisse in order to see what we can expect from long term investing returns.

We all think the stock market is the best and only thing one should invest in, but is it really and were the last 100 years just the triumph of the optimists? Let’s find out. More →

By Sven Carlin Central Banks Inflation Interest Rates Investing Strategy Investiv Daily Passively Managed Funds
13 Mar
This Might Be The Biggest Risk To The Stock Market
ETFs have grown extremely fast in the last 10 years.

This amplifies the risks of the stock market because, since when does the majority know what’s best?

There is one small example of what happens when things stop growing.

Introduction

I’ll close my series on the risks to the stock market by discussing a risk that few see where the prevailing wisdom in one of investing through passively managed mutual funds and ETFs. This is creating a big risk, even if it doesn’t look like that now. Let me elaborate on that. More →
By Sven Carlin ETFs Index Funds Investiv Daily Passively Managed Funds S&P 500
18 Jul
No Matter How Crazy The Trend It, Don’t Fight It
The economy has only grown 18% in the last 9 years while the stock market’s growth is measured in three digits.

Such imbalances can only last as long as the factors creating them persist.

A massive drop in stocks awaits us, but it won’t happen all that soon as the flow of funds is too strong.

Introduction

The S&P 500 (NYSEARCA: SPY) is up 259% since March 2009, and is showing no intention of stopping. More →
By Sven Carlin FED Investiv Daily Nasdaq Passively Managed Funds S&P 500 US Economy
01 Jun
Read This Before Investing In That Quant Fund
As long as there is stability, quants will do well. But when liquidity goes, so goes the quant fund.

Long Term Capital Management is a perfect example of how quickly a quant trend can turn into a quant fad.

Introduction

Quants are the hot thing on Wall Street.

Common sense doesn’t seem to work anymore as stocks are completely detached from their fundamentals and capital flows don’t really react to macroeconomic or specific company news. In an environment where no one knows what to do to beat the market, it’s completely normal for new trends—or better, new fads—to rise to a level of fame that will turn to notoriety. More →
By Sven Carlin Investiv Daily Passively Managed Funds Quant Funds
26 Apr
If You’re An Investor, Now’s The Time To Get Out Of The S&P 500, Index Funds, & ETFs
If you only look at averages, passive investing will always outperform active due to lower fees, but you can only expect average returns.

The market is skewed and inefficient due to huge flows into passive funds, outflows from active funds which should be doing the thinking, and euphoric management doing large stock buybacks. This creates a highly risky situation.

Avoid owning index funds, ETFs, and stocks that are largely owned by passive funds.

Introduction

There are two investing worlds. One is the world of active investing where the fund manager you hired analyzes company after company and invests in those they think are the best. The passive manager simply disperses your funds over an index where you will perform exactly as the market performs. With passive investing, fundamentals, dividends, growth, sales, scandals, and business trends don’t matter at all. More →
By Sven Carlin Actively Managed Funds Emerging Markets ETFs Herd Behavior Index Funds India Investiv Daily Passively Managed Funds S&P 500
19 Apr
The Next Bear Market Is Coming. Here’s Where It Will Start.
$2 billion a day flows into Vanguard to be mindlessly invested in the market through index funds.

When the only reason people invest is because staying on the sidelines means getting sore while others get rich, it usually spells trouble ahead.

When the investors plowing $2 billion per day understand what are they buying at extreme valuations, the next bear market will arrive and it will be terrible as the buying reverses to selling.

Introduction

A recent The New York Times article described how Vanguard, the $4.2 trillion mutual fund, is the fastest growing fund due to the attractiveness of passive investment vehicles and the average 0.12% fee the fund charges. The low fee is something I applaud as I strongly believe fees in the financial world should be minimal or performance related where nothing is paid if the manager doesn’t deliver. More →
By Sven Carlin Bear Market Herd Behavior Index Funds Investiv Daily Passively Managed Funds Recession US Economy Vanguard
31 Mar
Don’t Give Up On Stock Picking. Do It The Right Way.
Passively managed funds are extremely dangerous as their positive performance is self-reinforcing due to the huge positive net inflows.

But don’t jump to actively managed funds as, on aggregate, they will always underperform the market in the long term because they are the market.

The only solution is to invest like a business owner. You can do this by investing yourself or by finding an active manager who has the same principles.

Introduction

A recent Wall Street Journal article described how BlackRock (NYSE: BLK) is switching to robots from using humans to improve its stock picking for its actively managed funds. BLK’s reasoning is that its stock picking unit lagged in performance and has had many withdrawals that cut assets under management to $275 billion from $317 billion in the last three years despite the S&P 500 surging 27% in the same period. The hope is that robots will perform better at lower cost. More →
By Sven Carlin Actively Managed Funds Berkshire Hathaway Investing Strategy Investiv Daily Passively Managed Funds Warren Buffett
10 Nov
Why You Should Switch To Active Investing Now
PE ratios in the S&P 500 are all over the place; 7 of the top 20 stocks have PE ratios below 15, 7 from 20 to 30, and 5 above 30.

You can buy stable, growing businesses at PE ratios below 15, so why would you stick to passive investing and buying riskier stocks at PE ratios of above 20?

Maybe you think passive investing meets the definition of “boring,” something investors such as Buffett advocated. I don’t wish you the excitement of watching your portfolio fall from a PE ratio of 24 to a PE ratio of 15. Therefore, think about rebalancing now before it’s too late.

Introduction

Yesterday we discussed how the economy is doing well but that the market isn’t responding accordingly. This is because of the high valuations where only exceptional catalysts can push the market higher while any kind of negative news easily brings it into negative territory. However, by analyzing recent earnings, we have found large discrepancies among sectors in revenue and earnings growth. We understand this is normal for a well-diversified portfolio, but do we have to own more of the overvalued stocks and less of the undervalued stocks as a market capitalization weighted index fund does? More →
By Sven Carlin Actively Managed Funds Amazon Berkshire Hathaway Facebook Investing Strategy Investiv Daily Passively Managed Funds Warren Buffett
21 Oct
Passive or Active Funds? Neither… Sven Has A Better Option For You
Whenever you find yourself on the side of the majority, it is time to pause and reflect. – Mark Twain.

The biggest market risk comes from money flows. Everything is good while more money is being invested, but withdrawals will create forced asset sales and another bear market.

In the last 10 years, 27% of actively managed funds have outperformed the market, but you can increase your chances by choosing a third option.

Introduction

In the everlasting debate between passive and active investing, passive investing is currently winning. More money is flowing into passive than actively invested funds, and many celebrate victory and the death of stock pickers. Stock market movements are influenced by money flows and if more money flows into passive funds, they will clearly outperform the competition.

In today’s article, we’ll take a look at what is going on in the world of actively and passively managed funds, and will discuss a third option. An option that’s cheaper and one where your returns don’t depend on money market flows all that much. More →
By Sven Carlin Actively Managed Funds Index Funds Investing Strategy Investiv Daily Passively Managed Funds

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