What entails being a passive investor and why most are NOT.

The common perception is that if one invests in ETFs or indices like the S&P 500, one is being “passive”. The media have additionally confused the definition by considering any strategy that is rule-based or systematic as passive investing. This poor understanding has led many investors attempting to create a passive portfolio to end up Read more about What entails being a passive investor and why most are NOT.[…]

Why are active managers having a hard time outperforming? Why is alpha declining and disappearing?

We have all noticed that active investors such as mutual funds and hedge funds are struggling. It doesn’t even stop there. Famous investors like Warren Buffet and Charlie Munger are no longer generating remarkable excess returns. Nevertheless, there was a time in history when superstar managers created great wealth for their investors. So, how was Read more about Why are active managers having a hard time outperforming? Why is alpha declining and disappearing?[…]

How much alpha exists in the financial markets? Is alpha a zero sum game?

Ever wonder if generating alpha is a zero-sum game? Or do you think quotes like these below hold: “Active management can generate alpha for investors, and passive investing cannot.” “In a market with low returns, active management is better, as alpha becomes more important.” In this post we will establish how much alpha is available Read more about How much alpha exists in the financial markets? Is alpha a zero sum game?[…]

Why higher dispersion of returns or FED policy will NOT help active management outperform.

Research reports by active management firms often make the following claims: “The reason passive has been outperforming is that loose monetary policy has pushed all asset and security prices up, once the trend reverses active managers’ will outperform.” “Active managers will outperform once the dispersion of securities returns increases, as not all asset prices will Read more about Why higher dispersion of returns or FED policy will NOT help active management outperform.[…]