Quote:
Originally Posted by Slava
I completely disagree, and although I have an inherent bias, there are a few issues here. First, the idea of indexing is great and I use ETFs in my practice, but they only get you so far. It's true that they're cheap, and that's a good benefit of course. The fact is that beating the market isn't the main point though. An index investor never beats the market, by definition, so to suggest that it's a better way to go because the other person can't beat it is just silly.
The purely passive advocates still make a lot of active decisions as well. Asset allocation being one major component. All ETFs are not created equal either. There are still significant decisions to be made by the investor, and just using a robo-advisor (Ala wealthfront) is a pure one size fits all 'solution' to a problem that is nowhere near one size fits all.
Then we look at real world experience. It's cute to cherry pick the good news index stories, but they aren't all like that. The TSX only hit its mid 2008 level this year. That's six full years of being under water if you bought at the top. And of course a passive investor would buy at the top, because they're not making any active calls, right? Meanwhile most mutual funds (which are not a fair comparison, but the ETFs industry loves to point to them anyway) regained their value a fee years ago.
I have said it before on this board, but pure indexing just leaves a lot of money on the table in my opinion. There are better ways to structure things then just throwing your hands in the air and doing the bare minimum.
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I will try to link a few articles later but how do react to the studies that show year over year advisor performance above and below indexes is indistinguishable from luck. I do agree with you that advisors play an important role in balancing an managing risk but in terms of long term year over year games as a group investment advisors wether it be stocks or mutual funds dont out perform the market. So any advisor who is making pics that they believe are better or worse in terms of future performance advice is no better than shooting darts at a dart board.
I am not trying to disparage he services you provide and use as advisor for limited purposes but picking stocks or mutual funds that out perform a simple index as described by Dions post is not something that any advisor can do.