26 Feb Why We Believe In Active And Passive – No Ifs Or Buts
I’m always a little surprised when people talk about active and passive management as if it’s an either/or question. At Vanguard, we believe the right conjunction¹ is not or. It’s and. Both active and passive strategies have earned spots in your clients’ portfolios. So why do we see so many headlines asking, “Is active management dead?” and its fraternal twin, “Can indexing actually grow too big and fail?” (Vanguard’s answer is a resounding no.)
Improving the odds of outperformance
We wouldn’t offer active management if we didn’t believe active managers can succeed. But let’s be frank: It’s difficult. When you discuss with clients the investments you’ll use to help them reach their goals, reframe the conversation. It’s not about active versus passive. It’s about deciding which mix works the best for each client. When active is part of that mix, then it’s about improving the probability of outperformance. Our research has shown again and again that three factors help active funds beat their benchmarks: low cost, top talent, and patience.