There’s no question about it that most active funds underperform the indexes they track. For those of us in the know of things, we will typically always choose passive index funds over active funds. Now, I see many online financial gurus recommending active funds over passive ones (for example, Dave Ramsey), and a portion of the online community always reacts to these guys by saying how indexing is so much superior, which it is. However, I think we shouldn’t encourage these others to stop recommending active funds because it’s the active funds that ultimately keep the markets efficient. If everyone begins to index, which is impossible, but let’s say even 90% of investors are indexed, the markets would become far less efficient. This would hurt us. Someone has to foot the bill on keeping the markets properly priced, and this can be active investors. As such, we should simply agree with these online gurus like Dave Ramsey that recommend active funds because it does the overall market a service in which it keeps prices efficiently priced.
TLDR: Should we stop recommending passive index funds to others because it’s the active funds that are ultimately allowing the markets to stay efficiently priced?
What do you guys think?
Submitted March 25, 2018 at 01:30PM by vimzy17 https://ift.tt/2pGfcpC