Taking an active approach to down markets

Part 3: Exploring the truth about benchmark investing

As noted in our previous blog on the myths of benchmark investing, active and passive strategies have cycled through periods of over- and underperformance for the last 25 years. In this blog, we focus on performance during down markets, and show that active strategies have historically captured less of the downside than market benchmarks. We’ll explain why this is a very important distinction.

Limiting downside risk is a critical part of investing due to: 


Why active vs. passive isn’t an either/or choice

Part 2: Exploring the truth about benchmark investing

Life is full of undeniable truths. There’s, “An apple a day keeps the doctor away.” Another old favorite is, “Don’t judge a book by its cover.” And for years, investors have been trained to trust in market averages. Over the long term, the saying goes, you can’t beat the market — so why not join it through a passive investment strategy that mirrors exposure to a market benchmark?

Apples are surely nutritious, and reading a book before judging it is definitely prudent, but when it comes to investing solely in market averages, we need to talk.

In this series, we are examining some common myths about benchmark investing.


What do market benchmarks measure?

Part 1: Exploring the truth about benchmark investing

Let’s say you just moved into an area where local sports fans follow several baseball teams — like the Cubs and White Sox in Chicago, or the Mets and Yankees in New York. Obviously, you want to cheer for a winner, so you pick your new club based on how well they did in 2016. When they suddenly begin to flounder, you discover that the team had a handful of superstars who all got hurt or were traded, and the team is now mediocre in their absence.

Now apply that to investing.