You are confusing different issues:
* active vs passive,
* asset-allocation vs asset-class-rotation, and
* buy-and-hold vs market-timing.
A lot of what is written lumps them together, but they are different decisions.
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Most everyone agrees that passive security selection outperforms active selection, on average, by the amount of its additional costs. The major exception is with small cap stocks where there is more chaff than wheat and active selection pays for itself.
There is also the problem that a lot of the research has used open-ended mutual funds. This is not quite fair because the cash-flows in and out can cause acute problems for managers. They are also constrained by a requirement to stay invested even when they would personally get out.
There is also the evidence that individual investors will have different track records. When brokers' accounts are analysed there is correlation between good results in one period with good results in a later period. Of course some investors just do well when (eg) value stocks are doing well, and do worse when the tables turn.
There is also the evidence, even with mutual funds, that although active management cannot outperform returns, it can reduce volatility.
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I started saving money in the 1970's. I have rotated my major asset class holdings through my life. I don't agree at all with the mantra from 'advisors' that historical averages guarantee future performance. The markets have no memory. I believe this gospel was invented to get advisors off-the-hook for poor performance.
----------------
Buy-and-hold was never intended to mean buy-and-forget or hold-no-matter-what. That this past year has shown that 'advisors' have preached exactly that. This is another gospel invented to get advisors off-the-hook for poor performance.
* active vs passive,
* asset-allocation vs asset-class-rotation, and
* buy-and-hold vs market-timing.
A lot of what is written lumps them together, but they are different decisions.
------------------------
Most everyone agrees that passive security selection outperforms active selection, on average, by the amount of its additional costs. The major exception is with small cap stocks where there is more chaff than wheat and active selection pays for itself.
There is also the problem that a lot of the research has used open-ended mutual funds. This is not quite fair because the cash-flows in and out can cause acute problems for managers. They are also constrained by a requirement to stay invested even when they would personally get out.
There is also the evidence that individual investors will have different track records. When brokers' accounts are analysed there is correlation between good results in one period with good results in a later period. Of course some investors just do well when (eg) value stocks are doing well, and do worse when the tables turn.
There is also the evidence, even with mutual funds, that although active management cannot outperform returns, it can reduce volatility.
-----------------
I started saving money in the 1970's. I have rotated my major asset class holdings through my life. I don't agree at all with the mantra from 'advisors' that historical averages guarantee future performance. The markets have no memory. I believe this gospel was invented to get advisors off-the-hook for poor performance.
----------------
Buy-and-hold was never intended to mean buy-and-forget or hold-no-matter-what. That this past year has shown that 'advisors' have preached exactly that. This is another gospel invented to get advisors off-the-hook for poor performance.
