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Ah yes, the active versus passive debate. Is there any argument to be made that active investing is better than passive?
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"Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.
By now you probably know that I consider myself a passive investor. That said, is there ever a time when it makes sense to be an active investor so you can squeeze out a greater percentage on that return? That's the question from Ben in Indiana on the latest BONUS call.
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Should you incorporate big picture, economic trends into your investment strategy? Or should you adhere to a “set it and forget” mindset?
The answer depends on your time horizon, according to our guest, Justin Nielsen, the Market Research Director at Investors Business Daily. You may recall that Justin was on the show last month with his colleague, Chris Gessel, discussing passive versus active investing, but today we have him to ourselves.
Whether it’s a trade war, inflation, tax policy or interest rates that moves markets, Justin says that if you are a long-term investor, any distinct event “is a blip." How much of a blip? Well check out this neat chart that he provided:
You can see that going back more than a century, there are long, 15 to 20 year cycles. Whether it's the Roaring 20s, Post World War II, 80s and 90s Dot com run-up, there are always times of down or sideways action…it’s just part of the longer cycle. That means that as uncertain and scary events occur, you need to remind yourself, that they are simply part of being an investor.
And for you geeks out there, we even talk about the YIELD CURVE, which is just a way to compare short-term interest rates (the federal-funds rate) and long-term interest rates (the 10-year U.S. Treasury bond). It also happens to be one of those weird market indicators that can presage recessions and stock bear markets.
You can go here for more information on Investor's Business Daily.
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"Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.
Active versus passive investing has been a decades-long debate among long-term savers. The active argument is that with time, energy and analysis, investors can beat an index or basket of fixed securities. The passive credo is simple: reams of data support the notion that purchasing a fixed basket, like an index fund, within most asset classes, will produce superior returns over long time horizons.
Legendary investors like Warren Buffett, John Bogle (the founder of Vanguard) and Charley Ellis, have extolled the virtues of passive investing, because even if low cost, tax efficient active management does exist – and indeed there are some stars out there – most investors either blow up their own plans or choose expensive active managers that routinely underperform.
Although I have been an advocate of passive investing for a while, I also know that many people really want to try the active route. That’s why I invited two guests, both of whom are active acolytes from Investor’s Business Daily (IBD®) to help me try to guide those folks who are willing to take a stab at the active approach.
Chris Gessel directs the news, market, mutual fund, company and technology coverage that appears in IBD and Justin Nielsen is a member of the markets team at IBD. They say that if you have the itch, there are five critical questions that you must ask yourself:
1. Can you admit that you are wrong?
2. Do you like history?
3. Can you fight the urge to bargain shop?
4. Do you like to stick to rules or go with your gut?
5. Do you like to get your hands dirty or leave it to the experts?
Regardless of whether you have some experience or not, Chris and Justin recommend that you start with small amounts of money, in order to test out whether or not you have the discipline to do it.
If interested in joining Investor's Business Daily, you can click here for their current special offer.
Have a money question? Email us here or call 855-411-JILL.
Connect with me at these places for all my content:
https://twitter.com/jillonmoney
https://www.facebook.com/JillonMoney
https://www.instagram.com/jillonmoney/
https://www.linkedin.com/in/jillonmoney/
http://www.stitcher.com/podcast/jill-...
"Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.
We started the show with Sam in Seattle, who only in his 30s, is worried he won't have enough saved when it's time to retire. Sam and his wife are in great shape...and let's just say that Sam is probably very grateful I gave him a quick lesson in the power of compound interest.
Next up was Peggy from Connecticut who was wondering if it makes sense to go ahead and pay off a home equity line of credit (HELOC) instead of paying the $200 a month in interest.
We wrapped up hour one by answering a handful of emails.
Active versus passive investing has been a decades-long debate among long-term savers. The active argument is that with time, energy and analysis, investors can beat an index or basket of fixed securities. The passive credo is simple: reams of data support the notion that purchasing a fixed basket, like an index fund, within most asset classes, will produce superior returns over long time horizons.
Legendary investors like Warren Buffett, John Bogle (the founder of Vanguard) and Charley Ellis, have extolled the virtues of passive investing, because even if low cost, tax efficient active management does exist – and indeed there are some stars out there – most investors either blow up their own plans or choose expensive active managers that routinely underperform.
Although I have been an advocate of passive investing for a while, I also know that many people really want to try the active route. That’s why I invited two guests, both of whom are active acolytes from Investor’s Business Daily (IBD®) to help me try to guide those folks who are willing to take a stab at the active approach.
Chris Gessel directs the news, market, mutual fund, company and technology coverage that appears in IBD and Justin Nielsen is a member of the markets team at IBD. They say that if you have the itch, there are five critical questions that you must ask yourself:
1. Can you admit that you are wrong?
2. Do you like history?
3. Can you fight the urge to bargain shop?
4. Do you like to stick to rules or go with your gut?
5. Do you like to get your hands dirty or leave it to the experts?
Regardless of whether you have some experience or not, Chris and Justin recommend that you start with small amounts of money, in order to test out whether or not you have the discipline to do it.
If interested in joining Investor's Business Daily, you can click here for their current special offer.
Have a money question? Email us here or call 855-411-JILL.
Connect with me at these places for all my content:
https://twitter.com/jillonmoney
https://www.facebook.com/JillonMoney
https://www.instagram.com/jillonmoney/
https://www.linkedin.com/in/jillonmoney/
http://www.stitcher.com/podcast/jill-...
"Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.