Active vs Passive

You forgot the asterisk


*Past performance is not indicative of future results

I’m the same as you. The ones I’ve met with in the past tended to cherry pick based on sectors that had had a nice (recent) run, or they employed selective return measurements.

Whenever I’ve brought up Sharpe ratios or max drawdowns, the conversation ended. I’m not painting them all with the same brush. But consistency of returns is important too. For a good portion of my long portfolio, I mainly use passive funds and sector ETFs (mostly) these days. As far as active investments, increasingly I’m using options and finding very good (above market) and consistent success with methodical premium selling strategies - up or down markets don’t matter to me. In fact, the increased volatility that comes from down market moves has generated even healthier profits and a higher Sharpe ratio. It’s not for everyone. I realize that. Just my 2 cent experience and opinion.

The last 10 years everyone has looked great Eventually we will find out who is skinny dipping.

My philosophy is to use both.

There are 7k+ funds out there and only 10% of them have shown to consistently outperform, so 700 funds. However, the ones that do outperform are usually the ones were the manager is not constrained to a certain style (growth, value, mid cap, etc). But he can flex between both of where he sees opportunity.

I like to use the core of my portfolio in indexes then build satellites with active management that I either see value in sector wise or an active manager has shown to outperform consistently. But I would look further than 10 years track record.

quote:

---

The last 10 years everyone has looked great

---

kinda like all of us back in late 90's with tech boom.

it was not uncommon at all for mutual funds to be yielding 40% and 50% returns. If I recall PBHG was one. I got over 100% return on Janus twenty fund. Thing went from like 40 something NAV to 90 something. was nuts.

Exactly! And if they just show you the *average* return, you wouldn’t know about the volatility/massive swings from top to bottom. You wouldn’t know that his “above average” gains had been achieved by riding on a roller coaster.